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Kirkland's Reports Third Quarter 2021 Results Release : 12/2/2021 7:00:00 AM NASHVILLE , Tenn . , Dec. 2 , 2021 / PRNewswire / -- Kirkland's , Inc. ( Nasdaq : KIRK ) ( " Kirkland's " or the " Company " ) , a specialty retailer of home décor and furnishings , announced financial results for the 13 and 39 - week periods ended October 30 , 2021 . Third Quarter 2021 Financial Summary vs. Prior Year Quarter • Net sales decreased 2.0 % to $ 143.6 million , with 3.1 % fewer stores ● Comparable sales decreased 0.7 % , including an e - commerce increase of 7.3 % • Gross profit margin decreased 140 basis points to 34.7 % • Earnings per diluted share was $ 0.51 compared to $ 0.82 • Adjusted earnings per diluted share was $ 0.51 compared to $ 0.66 • EBITDA was $ 14.1 million compared to $ 18.9 million • Adjusted EBITDA was $ 14.8 million compared to $ 18.7 million • Operating income was $ 9.0 million compared to $ 13.1 million • Cash balance of $ 26.5 million with no outstanding debt ; total liquidity of $ 100.9 million • Share repurchases of $ 16.5 million in the quarter • Store count at quarter end of 369 Management Commentary " While the third quarter had its challenges , we remain confident in our overall position as we continue executing upon our long - term transformation strategy , " said Steve " Woody " Woodward , president and CEO of Kirkland's . " We experienced softer than expected sales in the final weeks of the quarter but ended with an 8.4 % two - year comparable sales increase . We continue to navigate the broader macro issues related to supply chain and labor constraints , which affected year - over - year profitability . Stripping away the incremental freight costs in our supply chain , we continued to achieve gross margin expansion . " Looking at our results through the end of November , we were impacted by inconsistent traffic patterns and broader supply chain constraints . During Black Friday , we saw in - store traffic remain relatively flat on a year - over - year basis , but there was a meaningful decline in e - commerce traffic , which led to a total sales comp decline for the first month of the fiscal fourth quarter . Given our third quarter results , along with continued supply chain headwinds and choppy sales patterns , we are revising our outlook for the remainder of the year . " Despite these headwinds , we are excited about the progress we've been making as we enter 2022. We've started a brand awareness campaign ahead of our rebranding launch to Kirkland's Home , which we expect to take place in the first quarter of 2022. Additionally , we are working to strengthen our digital capabilities within the e - commerce site to further enhance the omnichannel experience for our customers . We are also prioritizing our in - store floor layouts for new furniture and outdoor product assortments that we are rolling out in the first half of the year . We believe having a strong furniture and outdoor merchandise mix will help mitigate our seasonal reliance on holiday shopping and help drive new customer growth going forward . " Overall , we remain on track to achieve our long - term financial targets and are firmly committed to the strategic initiatives we've set forth . Our commitment to optimizing our merchandising assortment , stabilizing margins and driving profitable growth has not wavered , and we firmly believe we are on track to become a high - performance specialty home furnishing retailer with quality products at affordable price points . Although we don't have a clear indication of when supply chain constraints will subside , we are experiencing strong sell - through with the new product assortments that we are able to get to our floor , which gives us further confidence that our merchandise transformation is working and resonating with consumers . We believe we have the necessary infrastructure and team in place to continue executing upon our strategy , ultimately driving long - term shareholder value . " Revised Fourth Quarter 2021 Outlook The Company now expects a mid - to - high - single - digit same - store sales decrease for the fourth quarter of fiscal 2021 and a mid - single digit same - store sales increase for fiscal 2021. With the expected sales decline and freight impact , the Company anticipates earnings in the fourth quarter to be lower than the prior - year period , while still expecting year - over - year earnings growth of approximately 50 % for fiscal 2021 . Strategic Initiatives and Financial Targets Kirkland's key strategic initiatives include : • Accelerating product development to reinforce quality and relevancy as the Company continues its transformation into a specialty retailer where customers are able to furnish their entire home on a budget ; • Bolstering its omni - channel strategy via website enhancements , more focused marketing spend , an expanded online assortment , and an improved in store experience ; • Improving the customer experience with the Company's re - launched loyalty program , extended credit options and broadened delivery options ; and • Utilizing its leaner infrastructure to be nimbler to changes in consumer preference and buying behaviors . Kirkland's annual financial targets include : • Comparable sales growth , driven by e - commerce , merchandise improvements and brick - and - mortar store productivity . The Company expects e commerce to continue to grow as a percent of its total business to over 50 % of sales . The Company also intends to focus on improving the contribution of its remaining store base , which is an integral part of its omni - channel strategy and supports improved profitability of its e - commerce sales . • Increasing gross margin by continuing with the Company's current discipline of limited promotional offers , expanding direct sourcing , improving supply chain efficiency and reducing occupancy costs . With improved merchandise quality and to support a better customer experience , the Company will continue to move towards more targeted promotions . Direct sourcing is expected to increase from approximately 20 % of purchases in 2020 to 70 % by 2025. With these improvements , continued efficiencies in the Company's supply chain and lower occupancy costs , Kirkland's goal is to improve its annual gross profit margin to a mid - to - high 30 % range over the next one - to - two years . Improving profitability by leveraging the leaner infrastructure with comparable sales growth . The Company believes its ideal store count should be approximately 350 stores with additional opportunities for more favorable rent terms during ongoing lease renewals . With approximately $ 45 million in annualized operating expenses eliminated from the business in 2020 , the Company expects annual EBITDA as a percent of sales to be in the low - to mid double - digit range in the next one - to - two years and annual operating income as a percentage of sales to be in the high - single - digit range in the next one - to - two years . • Maintaining adequate liquidity and generating free cash flow while continuing to invest in key strategic initiatives and returning excess cash to Kirkland's shareholders .