Kirkland's(KIRK) - 2026 Q2 - Quarterly Results

Company Announcements & Business Updates The company announced new Bed Bath & Beyond Home store openings, the sale of Kirkland's Home IP, and strategic plans for store conversions and wholesale expansion, alongside CEO commentary on Q2 challenges Recent Business Highlights The Brand House Collective announced the successful opening of its first Bed Bath & Beyond Home store, sold Kirkland's Home IP, and plans to accelerate store conversions and wholesale market expansion - The company sold Kirkland's Home intellectual property to Bed Bath & Beyond, Inc. for $10 million on September 15, 2025, and secured a $20 million extension to its existing credit facility to support operations and store conversions[5] - The first Bed Bath & Beyond Home store successfully opened in Nashville on August 8, 2025, receiving strong customer response and national media attention[5] - The company plans to open 5 additional Bed Bath & Beyond Home stores in FY2025 and convert all Kirkland's Home stores to Bed Bath & Beyond stores within the next 24 months, with the first buybuy Baby store expected to open in FY2026[5] - The company is in the early planning stages of expanding Kirkland's Home into the wholesale market to create new growth channels[5] CEO Commentary on Q2 Performance CEO Amy Sullivan noted Q2 performance was severely impacted by tornado damage to the distribution center and inventory liquidation for Bed Bath & Beyond expansion, leading to reduced profitability and sales pressure - Q2 performance was significantly impacted by two major events: tornado damage to the distribution center and inventory liquidation to expand the Bed Bath & Beyond product line[4] - These factors were the primary causes of a year-over-year decline in profitability and short-term pressure on sales, particularly e-commerce[4] - Inventory actions are strategic, aiming to reallocate space and capital to the Bed Bath & Beyond product line for stronger future growth[4] Q2 Fiscal 2025 Financial Summary The Q2 FY2025 financial summary details key performance indicators, including declining sales and profitability, and provides a snapshot of the company's balance sheet Key Financial Metrics The company's Q2 FY2025 net sales and gross profit declined year-over-year, primarily due to comparable sales decline, inventory liquidation, and tornado-related costs, leading to expanded net and adjusted EBITDA losses Q2 Fiscal 2025 Key Financial Metrics | Metric | Q2 2025 (Millions USD) | Q2 2024 (Millions USD) | YoY Change (%) | | :------------------- | :------------------- | :------------------- | :------------- | | Net Sales | 75.8 | 86.3 | -12.16% | | Comparable Sales (Consolidated) | -9.7% | - | - | | Comparable Store Sales | +0.4% | - | - | | E-commerce Sales | -38.5% | - | - | | Gross Profit | 12.4 | 17.7 | -30.06% | | Gross Margin | 16.3% | 20.5% | -4.2 pp | | Net Loss | (20.2) | (14.5) | +39.31% | | Diluted Loss Per Share | (0.90) | (1.11) | -18.92% | | Adjusted Net Loss* | (17.8) | (13.9) | +28.06% | | Adjusted EBITDA* | (14.3) | (10.2) | +40.20% | - Gross profit decreased primarily due to lower merchandise margins and reduced leverage of store operating costs from lower sales, with merchandise margin decline attributed to inventory liquidation for Bed Bath & Beyond expansion, tornado-damaged inventory write-offs, and additional tariff costs[6] - Operating expenses were $31.1 million (41.1% of net sales), up from $31.0 million (35.9% of net sales) in the prior year, mainly due to increased insurance costs related to tornado damage[9] Balance Sheet Snapshot As of August 2, 2025, the company's store count decreased to 309, inventory declined, cash balance was $3.6 million, and total debt included $41.5 million in revolving credit and $13.7 million in related-party debt - The company closed 5 stores during the quarter, ending with a total of 309 stores[9] Inventory and Cash Balance | Metric | August 2, 2025 (Millions USD) | August 3, 2024 (Millions USD) | | :-------- | :------------------- | :------------------- | | Inventory | 81.7 | 92.8 | | Cash Balance | 3.6 | - | - As of August 2, 2025, the company had $41.5 million in outstanding borrowings and $5.1 million in outstanding letters of credit, along with $13.7 million in debt to affiliate Beyond; as of September 16, 2025, it had $49.0 million in outstanding borrowings, $5.1 million in outstanding letters of credit, $13.7 million in the Beyond term loan, and $20.0 million available from Beyond[9] Consolidated Financial Statements This section presents the unaudited consolidated condensed statements of operations, balance sheets, and cash flows for the specified periods, detailing the company's financial position and performance Unaudited Consolidated Condensed Statements of Operations The company recorded year-over-year declines in net sales and gross profit for both Q2 and the 26-week period of FY2025, resulting in expanded operating and net losses, reflecting business transformation challenges 13-Week Period Ended August 2, 2025 This section details the unaudited consolidated condensed statements of operations for the 13-week period ended August 2, 2025, showing net sales, gross profit, and net loss 13-Week Period Consolidated Condensed Statements of Operations (Thousands USD) | Metric | August 2, 2025 | August 3, 2024 | | :------------------------------------------ | :----------- | :----------- | | Net Sales | $75,788 | $86,289 | | Cost of Sales | 63,419 | 68,629 | | Gross Profit | 12,369 | 17,660 | | Operating Expenses: | | | | Compensation and benefits | 17,827 | 18,653 | | Other operating expenses | 12,643 | 11,384 | | Depreciation | 591 | 925 | | Asset impairment | 52 | 20 | | Total operating expenses | 31,113 | 30,982 | | Operating Loss | (18,744) | (13,322) | | Interest expense | 1,464 | 1,420 | | Other income | (39) | (120) | | Loss before income taxes | (20,169) | (14,622) | | Income tax expense (benefit) | 10 | (118) | | Net Loss | $(20,179) | $(14,504) | | Loss Per Share (Basic and Diluted) | $(0.90) | $(1.11) | | Weighted Average Shares Outstanding (Basic and Diluted) | 22,460 | 13,074 | 26-Week Period Ended August 2, 2025 This section details the unaudited consolidated condensed statements of operations for the 26-week period ended August 2, 2025, showing net sales, gross profit, and net loss 26-Week Period Consolidated Condensed Statements of Operations (Thousands USD) | Metric | August 2, 2025 | August 3, 2024 | | :------------------------------------------ | :----------- | :----------- | | Net Sales | $157,292 | $178,042 | | Cost of Sales | 124,639 | 133,314 | | Gross Profit | 32,653 | 44,728 | | Operating Expenses: | | | | Compensation and benefits | 35,681 | 37,939 | | Other operating expenses | 24,909 | 25,702 | | Depreciation | 1,251 | 1,886 | | Asset impairment | 72 | 31 | | Total operating expenses | 61,913 | 65,558 | | Operating Loss | (29,260) | (20,830) | | Interest expense | 2,812 | 2,547 | | Other income | (123) | (236) | | Loss before income taxes | (31,949) | (23,141) | | Income tax expense | 54 | 193 | | Net Loss | $(32,003) | $(23,334) | | Loss Per Share (Basic and Diluted) | $(1.44) | $(1.79) | | Weighted Average Shares Outstanding (Basic and Diluted) | 22,277 | 13,019 | Unaudited Consolidated Condensed Balance Sheets As of August 2, 2025, the company's total assets and liabilities decreased, and shareholder deficit expanded, reflecting the impact of business restructuring and losses Consolidated Condensed Balance Sheets (Thousands USD) | Metric | August 2, 2025 | February 1, 2025 | August 3, 2024 | | :-------------------------------- | :----------- | :----------- | :----------- | | Assets | | | | | Cash and cash equivalents | $3,641 | $3,820 | $4,461 | | Inventory, net | 81,693 | 81,899 | 92,760 | | Total current assets | 91,646 | 91,304 | 105,437 | | Property and equipment, net | 18,749 | 22,062 | 25,454 | | Operating lease right-of-use assets | 108,672 | 121,229 | 128,046 | | Total assets | $221,930 | $242,188 | $266,219 | | Liabilities and Shareholder Deficit | | | | | Accounts payable | $56,583 | $43,935 | $59,967 | | Total current liabilities | 116,882 | 152,672 | 119,525 | | Operating lease liabilities (long-term) | 83,100 | 95,085 | 100,565 | | Related party debt, net (long-term) | 11,895 | — | — | | Long-term debt, net | 41,520 | 10,003 | 61,396 | | Total liabilities | 257,091 | 261,205 | 285,924 | | Shareholder deficit | (35,161) | (19,017) | (19,705) | | Total liabilities and shareholder deficit | $221,930 | $242,188 | $266,219 | Unaudited Consolidated Condensed Statements of Cash Flows For the 26-week period ended August 2, 2025, the company's operating cash outflow significantly decreased, while financing cash inflow primarily came from revolving credit borrowings and common stock issuance, with a slight decrease in period-end cash balance 26-Week Period Consolidated Condensed Statements of Cash Flows (Thousands USD) | Metric | August 2, 2025 | August 3, 2024 | | :------------------------------------------ | :----------- | :----------- | | Cash Flows From Operating Activities: | | | | Net loss | $(32,003) | $(23,334) | | Net cash used in operating activities | (10,066) | (26,388) | | Cash Flows From Investing Activities: | | | | Capital expenditures | (1,026) | (1,193) | | Net cash used in investing activities | (1,008) | (1,176) | | Cash Flows From Financing Activities: | | | | Revolving credit borrowings | 88,644 | 22,800 | | Revolving credit repayments | (90,124) | (4,100) | | Proceeds from common stock issuance | 8,000 | — | | Net cash provided by financing activities | 10,895 | 28,220 | | Cash and Cash Equivalents: | | | | Net (decrease) increase | (179) | 656 | | Beginning balance | 3,820 | 3,805 | | Ending balance | $3,641 | $4,461 | Non-GAAP Financial Measures This section defines the company's non-GAAP financial measures and provides detailed reconciliations of net loss, EBITDA, operating loss, and diluted loss per share to their adjusted non-GAAP counterparts Non-GAAP Definitions and Purpose The company uses non-GAAP financial measures like EBITDA, Adjusted EBITDA, Adjusted Operating Loss, Adjusted Net Loss, and Adjusted Diluted Loss Per Share to supplement GAAP metrics, providing additional insight into operational performance, not as substitutes for GAAP - Non-GAAP financial measures include EBITDA, Adjusted EBITDA, Adjusted Operating Loss, Adjusted Net Loss, and Adjusted Diluted Loss Per Share, used to supplement GAAP financial statements[21] - EBITDA is defined as net loss plus income tax expense, interest expense, other income, and depreciation; Adjusted EBITDA further adjusts for asset impairment, share-based compensation, severance, tornado-related costs, and financing-related legal or professional fees not eligible for capitalization[22] - Adjusted Operating Loss and Adjusted Net Loss include similar adjustments; these non-GAAP metrics are intended to provide additional information and should not be considered in isolation or as substitutes for GAAP results[23][24] Reconciliation of Net Loss to EBITDA and Adjusted EBITDA The company provided a reconciliation of net loss to EBITDA and Adjusted EBITDA, showing that Adjusted EBITDA loss expanded for both the 13-week and 26-week periods after considering various adjustments Reconciliation of Net Loss to EBITDA and Adjusted EBITDA (Thousands USD) | Metric | 13-Week Period (August 2, 2025) | 13-Week Period (August 3, 2024) | 26-Week Period (August 2, 2025) | 26-Week Period (August 3, 2024) | | :------------------------------------------ | :----------------------- | :----------------------- | :----------------------- | :----------------------- | | Net Loss | $(20,179) | $(14,504) | $(32,003) | $(23,334) | | Income tax expense (benefit) | 10 | (118) | 54 | 193 | | Interest expense | 1,464 | 1,420 | 2,812 | 2,547 | | Other income | (39) | (120) | (123) | (236) | | Depreciation | 2,060 | 2,513 | 4,150 | 5,137 | | EBITDA | $(16,684) | $(10,809) | $(25,110) | $(15,693) | | Adjustments: | | | | | | Asset impairment | 52 | 20 | 72 | 31 | | Share-based compensation expense | 82 | 264 | 321 | 556 | | Beyond transaction costs (non-capitalizable) | 100 | — | 229 | — | | Severance | 157 | 317 | 283 | 390 | | Tornado-related expenses, net | 1,974 | — | 1,974 | — | | Total Adjustments | 2,365 | 601 | 2,879 | 977 | | Adjusted EBITDA | $(14,319) | $(10,208) | $(22,231) | $(14,716) | Reconciliation of Operating Loss to Adjusted Operating Loss The company provided a reconciliation of operating loss to adjusted operating loss, indicating an improvement in adjusted operating loss for both periods after deducting specific non-recurring or non-cash adjustments Reconciliation of Operating Loss to Adjusted Operating Loss (Thousands USD) | Metric | 13-Week Period (August 2, 2025) | 13-Week Period (August 3, 2024) | 26-Week Period (August 2, 2025) | 26-Week Period (August 3, 2024) | | :------------------------------------------ | :----------------------- | :----------------------- | :----------------------- | :----------------------- | | Operating Loss | $(18,744) | $(13,322) | $(29,260) | $(20,830) | | Adjustments: | | | | | | Asset impairment | 52 | 20 | 72 | 31 | | Share-based compensation expense | 82 | 264 | 321 | 556 | | Beyond transaction costs (non-capitalizable) | 100 | — | 229 | — | | Severance | 157 | 317 | 283 | 390 | | Tornado-related expenses, net | 1,974 | — | 1,974 | — | | Total Adjustments | 2,365 | 601 | 2,879 | 977 | | Adjusted Operating Loss | $(16,379) | $(12,721) | $(26,381) | $(19,853) | Reconciliation of Net Loss to Adjusted Net Loss and Adjusted Diluted Loss Per Share The company provided a reconciliation of net loss to adjusted net loss and adjusted diluted loss per share, showing improvements in both after considering adjustments and their tax impact Reconciliation of Net Loss to Adjusted Net Loss and Adjusted Diluted Loss Per Share (Thousands USD, except per share data) | Metric | 13-Week Period (August 2, 2025) | 13-Week Period (August 3, 2024) | 26-Week Period (August 2, 2025) | 26-Week Period (August 3, 2024) | | :------------------------------------------ | :----------------------- | :----------------------- | :----------------------- | :----------------------- | | Net Loss | $(20,179) | $(14,504) | $(32,003) | $(23,334) | | Adjustments: | | | | | | Asset impairment | 52 | 20 | 72 | 31 | | Share-based compensation expense | 82 | 264 | 321 | 556 | | Beyond transaction costs (non-capitalizable) | 100 | — | 229 | — | | Severance | 157 | 317 | 283 | 390 | | Tornado-related expenses, net | 1,974 | — | 1,974 | — | | Total Adjustments | 2,365 | 601 | 2,879 | 977 | | Tax benefit on adjustments | 10 | 4 | 20 | 18 | | Total Adjustments (after tax) | 2,375 | 605 | 2,899 | 995 | | Adjusted Net Loss | $(17,804) | $(13,899) | $(29,104) | $(22,339) | | Diluted Loss Per Share | $(0.90) | $(1.11) | $(1.44) | $(1.79) | | Adjusted Diluted Loss Per Share | $(0.79) | $(1.06) | $(1.31) | $(1.72) | | Diluted Weighted Average Shares Outstanding | 22,460 | 13,074 | 22,277 | 13,019 | Additional Company Information This section provides an overview of The Brand House Collective, Inc., outlines forward-looking statements, and details the upcoming conference call for Q2 FY2025 results About The Brand House Collective, Inc. The Brand House Collective, Inc. is a multi-brand merchandising, supply chain, and retail operator managing an iconic portfolio of home and family brands including Kirkland's Home and Bed Bath & Beyond - The company is a multi-brand merchandising, supply chain, and retail operator managing brands including Kirkland's Home, Bed Bath & Beyond Home, Bed Bath & Beyond, buybuy Baby, and Overstock[13] - Currently operates over 300 stores in 35 U.S. states and maintains e-commerce websites such as www.kirklands.com and www.bedbathandbeyondhome.com[13](index=13&type=chunk) Forward-Looking Statements This report contains forward-looking statements involving potential future circumstances and developments, subject to various known and unknown risks and uncertainties that could cause actual results to differ materially from projections - Forward-looking statements are protected by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to the finalization of the company's quarterly financial and accounting procedures[14] - Risks and uncertainties include the impact of the Beyond transaction, unexpected costs, litigation, continued availability of capital and financing, ability to realize synergies, success of new store openings or rebranding, marketing capabilities, liquidity risks, ability to continue as a going concern, natural disasters, inflation, tariff impacts, supply chain disruptions, and information technology system security breaches[14] - The company undertakes no obligation to update any forward-looking statements unless required by law[14] Conference Call Information The Brand House Collective management will host a conference call on September 16, 2025, to discuss Q2 FY2025 financial results and provide a Q&A session - The conference call will be held on Tuesday, September 16, 2025, at 9:00 AM ET, hosted by President and CEO Amy Sullivan and SVP and CFO Andrea Courtois[10] - The call will be webcast live and an archived replay will be available through the investor relations section of the company's website, with a telephone replay service available until September 23, 2025[11][12]