Financial Data and Key Metrics Changes - For Q2 2026, net sales were $75.8 million, down from $86.3 million in the prior year, reflecting a 12.5% year-over-year decline [11] - Comparable sales decreased by 9.7%, with a 5% decline in store count [12] - Gross margin decreased by 410 basis points to 16.3% of sales, primarily due to a decline in merchandise margin and occupancy deleverage [12] - Net loss was $19.4 million compared to $14.5 million in the prior year, while adjusted net loss was $17.8 million compared to $13.9 million [14] - Adjusted loss per share improved to $0.90 from $1.11 in the prior year, driven by an increase in share count from 13 million to 22.3 million [15] Business Line Data and Key Metrics Changes - The e-commerce segment faced a significant decline, with comparable sales down 38.5%, impacted by a tornado disruption and liquidation efforts [12] - Store sales showed slight positive growth, driven by increased traffic and conversion, but were offset by lower average transaction values due to liquidation [12] Market Data and Key Metrics Changes - The company experienced a significant impact on e-commerce sales, estimated to be negatively affected by 750 basis points due to the tornado disruption [12] - The inventory at the end of the quarter was $82 million, down 12% from the prior year, influenced by a temporary pause in shipments due to tariff uncertainties [16] Company Strategy and Development Direction - The company is undergoing a transformation through its partnership with Bed Bath & Beyond, with plans to convert all Kirkland's Home stores into Bed Bath & Beyond Home stores over the next 24 months [8] - The conversion strategy is capital-light, with each store conversion expected to cost less than $100,000 [8] - The company is also exploring expansion into the wholesale market for Kirkland's Home, aiming to improve supply chain efficiency and unit economics [9] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in Q2 due to the tornado and liquidation efforts but expressed confidence in the brand's future and the strength of the Bed Bath & Beyond name [3][4] - The company expects to continue promotional activities and anticipates some incremental tariff costs in Q3, while focusing on setting the stage for growth through store conversions [18] Other Important Information - The company plans to close about 25 stores with natural lease expirations in January 2026, while estimating that 250 to 275 existing Kirkland's stores will remain in the mix over time [28] - The company is actively working on mitigating tariff impacts and is negotiating with vendors to balance sourcing strategies [36] Q&A Session Summary Question: What were the conversion costs for the Brentwood store? - The conversion cost for the Brentwood store was approximately $30,000, significantly less than the projected $100,000 due to its recent remodeling [23] Question: How many locations will ultimately be converted? - The company estimates that 250 to 275 of the existing Kirkland's stores will remain in the mix, with plans to close about 25 stores [28] Question: When can we expect stabilization in the e-commerce business? - Management indicated that they expect e-commerce to normalize back to earlier year declines, focusing on more profitable brick-and-mortar transactions [31] Question: What is the expected impact of tariffs in Q3 and Q4? - Tariff impacts are expected to be around 100 basis points in Q3, with limited impact anticipated in Q4 [39] Question: How many conversions are planned for 2026? - The company has placed buys for 30 conversions for the first quarter of 2026, aiming for a wide rollout in time for the back-to-campus season [41]