Zacks_Analysts' Blog : Kirkland's Posts Loss - Analyst Blog

Kirkland’s Inc. (KIRK) reported a second-quarter 2011 loss of 2 cents a share, which lagged the Zacks Consensus Estimate of earnings of 2 cents per share. Earnings were positive at 16 cents a share, a year ago.

Quarter in Detail

Kirkland’s net sales went up marginally by 0.2% year over year to $89.7 million as against $89.5 million in the year-ago quarter. Consolidated comparable store sales declined 8.0% in the quarter compared with an increase of 1.0% in the prior-year quarter.

On a year-over-year basis, gross profit contracted 11.5% to $30.8 million, while Kirkland posted an operating loss of $0.6 million, as against an operating income of $5.1 million.

Other Financial Update

Kirkland’s exited the quarter with cash and cash equivalents of $75.1 million and no debt.

The company ended the quarter with 294 stores, after opening 7 stores and closing 6 stores during the second quarter of 2011.

In addition, Kirkland’s board has authorized a stock repurchase plan of up to $40 million over the next 18 months, during the quarter.

The company has also agreed to renew its $50 million senior secured credit facility, which will mature in August 2016. Bank of America Corporation (BAC) will act as the administrative agent for the facility.

Guidance

Kirkland's expects to open approximately 15-20 net new stores in fiscal 2011, representing a square footage growth of 9% to 12%.

For fiscal 2011, the company expects to have approximately $90 million to $100 million in cash and cash equivalents at the end of fiscal 2011, excluding any potential share repurchase activity. Further, capital expenditures are estimated to range between $24 million and $27 million.

For the third quarter of 2011, Kirkland's expects sales and earnings to be similar to those reported in the second quarter of 2011. Total sales and merchandise margin are expected to be sequentially higher, but should be offset by the impact from higher expenses related to store openings in the third quarter.

For the second half of fiscal 2011, the company expects to continue with new store and square footage growth plans, deliver strong new store performance and generate significant cash flow. However, we believe that the current business trends and the uncertain economic outlook in the U.S. will negatively impact the performance.

Kirkland’s currently has a Zacks #4 Rank, which translates into a short-term 'Sell' rating. On a long term basis, we provide an "Underperform" rating on the stock.