Kirkland's(US:KIRK)2021-12-01 16:00Financial Performance - Net sales decreased by 2.0% to $143.6 million for the third 13 weeks of fiscal 2021 compared to $146.6 million for the prior year period, driven by 3% fewer stores and a decline in in-store traffic [62]. - Net income for the third 13 weeks of fiscal 2021 was $7.2 million, or $0.51 per diluted share, compared to $12.4 million, or $0.82 per diluted share, for the same period in fiscal 2020, representing a 41.5% decline [69]. - Net sales increased by 9.6% to $381.99 million for the first 39 weeks of fiscal 2021, compared to $348.58 million for the same period in the prior year [71]. - Net income was reported at $9.57 million, or $0.64 per diluted share, compared to a net loss of $4.45 million, or $0.31 per diluted share, for the same period last year [77]. Gross Profit and Expenses - Gross profit as a percentage of net sales decreased by 140 basis points from 36.1% in the third 13 weeks of fiscal 2020 to 34.7% in the third 13 weeks of fiscal 2021, primarily due to unfavorable landed product margin and increased e-commerce shipping expenses [64]. - Gross profit margin improved by 560 basis points from 28.4% in the first 39 weeks of fiscal 2020 to 34.0% in the first 39 weeks of fiscal 2021 [72]. - Compensation and benefits as a percentage of net sales decreased from 14.6% in the third 13 weeks of fiscal 2020 to 13.6% in the third 13 weeks of fiscal 2021, primarily due to a decrease in corporate bonus expense [65]. - Compensation and benefits as a percentage of net sales decreased from 17.3% to 15.8% due to sales leverage from store and corporate payroll expenses [73]. - Other operating expenses as a percentage of net sales increased from 11.4% in the third 13 weeks of fiscal 2020 to 13.3% in the third 13 weeks of fiscal 2021, mainly due to increased advertising expenses [66]. - Other operating expenses increased by 80 basis points to 13.7% of net sales, primarily due to increased advertising expenses [74]. Store Operations - The company permanently closed six store locations and opened two new store locations during the 39-week period ended October 30, 2021, resulting in a decrease in store units of 1.1% [60]. - The company anticipates additional store closures and limited store openings as part of its store optimization strategy, aiming for an ideal store count of approximately 350 stores [60]. Cash Flow and Investments - Cash used in operating activities was approximately $38.7 million during the first 39 weeks of fiscal 2021, compared to cash provided of approximately $14.5 million in the prior year [86]. - Net cash used in investing activities for the first 39 weeks of fiscal 2021 was $5.2 million, down from $7.6 million in the prior year [87]. - Capital expenditures primarily focused on technology and omni-channel projects ($2.3 million), distribution center enhancements ($1.1 million), and new store openings [87]. - Net cash used in financing activities was $30.1 million, mainly for the repurchase of common stock under the share repurchase plan [88]. - The company completed a share repurchase plan totaling $29.8 million during the first 39 weeks of fiscal 2021, repurchasing 1,414,642 shares [94]. Tax and Impairment - Income tax expense for the third 13 weeks of fiscal 2021 was approximately $1.8 million, or 19.9% of income before income taxes, compared to $691,000, or 5.3%, in the prior year period [68]. - Income tax expense was approximately $1.73 million, or 15.3% of income before income taxes, compared to an income tax benefit of $15.65 million in the prior year [76]. - The company recorded an impairment charge of approximately $754,000 in the first 39 weeks of fiscal 2021, significantly lower than the $9.0 million charge in the prior year [75]. Financial Position and Credit - As of October 30, 2021, the company had approximately $26.5 million in cash and cash equivalents, with $74.4 million available for borrowing under the Credit Agreement [92][93]. - The Credit Agreement includes a $75 million senior secured revolving credit facility with a maturity date of December 2024 [89]. - As of October 30, 2021, there were no outstanding borrowings under the Credit Agreement, and the company was in compliance with all covenants [92]. - The company anticipates that its cash balances and cash flow from operations will be sufficient to fund planned capital expenditures and working capital for at least the next twelve months [93]. - The company is exposed to interest rate changes, but a 1% increase or decrease in interest rates would not have a material impact on operations [104]. - The company has no off-balance sheet arrangements that could materially affect its financial condition [96].