Kirkland's(US:KIRK)2025-09-16 20:09Store Operations - As of August 2, 2025, the company operated 309 stores across 35 states, down from 325 stores a year earlier, reflecting a decrease of 4.9% in store count [76] - The company reported a decrease in store units of 1.6% for the 13-week period ended August 2, 2025, and 2.5% for the 26-week period ended August 2, 2025 [86] - The average square footage per store slightly increased to 8,121 square feet as of August 2, 2025, compared to 8,109 square feet a year earlier [86] - The company has exclusive rights to operate small format stores under Beyond-owned trademarks, enhancing its market presence [77] Financial Performance - Net sales decreased 12.2% to $75.8 million for the second 13 weeks of fiscal 2025 compared to $86.3 million for the prior year period [87] - Gross profit as a percentage of net sales decreased 420 basis points from 20.5% in the second 13 weeks of fiscal 2024 to 16.3% in the second 13 weeks of fiscal 2025 [88] - Comparable sales decreased 9.7%, or $8.1 million, for the second 13 weeks of fiscal 2025 compared to the prior year period [87] - E-commerce comparable sales decreased 38.5% for the second 13 weeks of fiscal 2025, partially offset by a store comparable sales increase of 0.4% [87] - For the first 26 weeks of fiscal 2025, net sales decreased 11.7% to $157.3 million compared to $178.0 million for the prior year period [95] - Gross profit as a percentage of net sales decreased 430 basis points from 25.1% in the first 26 weeks of fiscal 2024 to 20.7% in the first 26 weeks of fiscal 2025 [96] - Net loss for the second 13 weeks of fiscal 2025 was $20.2 million, or a loss of $0.90 per diluted share, compared to a net loss of $14.5 million, or a loss of $1.11 per diluted share, for the prior year period [93] - For the 13-week period ended August 2, 2025, the net loss was $20,179 thousand compared to a net loss of $14,504 thousand for the same period in 2024, representing a 39% increase in losses year-over-year [106] - Adjusted EBITDA for the 26-week period ended August 2, 2025, was $(22,231) thousand, compared to $(14,716) thousand for the same period in 2024, indicating a decline in performance [106] Expenses and Costs - The company’s operating expenses are significantly influenced by compensation and benefits, which comprise the majority of its operating costs [85] - The company’s gross profit is impacted by various factors, including merchandise costs and occupancy costs, which are largely fixed [83] - Compensation and benefits as a percentage of net sales increased approximately 190 basis points from 21.6% to 23.5% in the second 13 weeks of fiscal 2025 [90] - Other operating expenses increased approximately 350 basis points from 13.2% to 16.7% as a percentage of net sales in the second 13 weeks of fiscal 2025 [91] Cash Flow and Financing - Cash flows from operating activities showed a net cash used of approximately $10.1 million for the second 26 weeks of fiscal 2025, a decrease from $26.4 million in the same period of fiscal 2024 [114] - Capital expenditures for the first 26 weeks of fiscal 2025 totaled $1,026 thousand, down from $1,193 thousand in the prior year, primarily focused on existing store maintenance and technology projects [115] - The company received $10.9 million in net cash from financing activities during the first 26 weeks of fiscal 2025, which included $8.0 million from the issuance of common stock to Beyond [116] - As of September 16, 2025, the company had $49.0 million in outstanding debt and $10.8 million available for borrowing under its revolving credit facility [113] - The company entered into a $20 million delayed draw term loan on September 15, 2025, to support its store conversion strategy [110] Strategic Partnerships and Risks - The company entered into a strategic partnership with Bed Bath & Beyond, involving a $17 million term loan and an $8 million subscription agreement, aimed at driving sustainable growth [77] - The company incurred $2.0 million in expenses related to damages from a tornado that impacted its Jackson, Tennessee distribution center, net of insurance proceeds [82] - The company recorded an income tax benefit of approximately $10,000 during the second 13 weeks of fiscal 2025, compared to an income tax expense of approximately $118,000 in the prior year period [92] - The company has substantial doubt about its ability to continue as a going concern for at least 12 months from the issuance of its financial statements due to liquidity concerns [111] - There is a risk that the company may not recover the full principal of its investments or that their liquidity may be diminished [121] - As of August 2, 2025, the company was not engaged in any foreign exchange contracts, hedges, interest rate swaps, derivatives, or other financial instruments [121]