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%, 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, with an adjusted net loss of $17.8 million [15] Business Line Data and Key Metrics Changes - E-commerce sales faced a significant decline of 38.5%, impacted by a tornado disruption and liquidation efforts [12] - Store sales showed slightly positive comparable sales 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 opened its first Bed Bath & Beyond Home Store in Brentwood, Tennessee, with strong initial sales and customer traffic exceeding expectations [5][6] - The company plans to convert all Kirkland's Home stores into Bed Bath & Beyond stores over the next 24 months, with each conversion expected to cost less than $100,000 [8] Company Strategy and Development Direction - The partnership with Bed Bath & Beyond is central to the company's transformation strategy, focusing on omnichannel retail and leveraging the Bed Bath & Beyond brand [10] - 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 future growth potential of the Bed Bath & Beyond brand [3][4] - The company expects to continue promotional activities and manage tariff costs while focusing on brick-and-mortar sales to improve profitability [18][32] Other Important Information - The company ended the quarter with $82 million in inventory, down 12% from the prior year, and total debt outstanding of $55.2 million [16] - Management indicated that they do not expect significant additional expenses related to the tornado damage in the second half of the year [17] 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 minimal renovations [23] Question: How many stores are expected to be converted versus closed? - The company plans to close about 25 stores with natural lease expirations and estimates that 250 to 275 existing Kirkland's stores will remain in the mix over time [28][29] Question: When can we expect stabilization in the e-commerce business? - Management anticipates that e-commerce may normalize to earlier declines, focusing on more profitable brick-and-mortar transactions [32] Question: What is the expected impact of tariffs in the back half of the year? - 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 in the first quarter of 2026, aiming for a wide rollout in preparation for the back-to-campus season [41]