Financial Data and Key Metrics Changes - For the second quarter, net sales were $75.8 million compared to $86.3 million in the prior year quarter, reflecting a decrease driven by a 9.7% decline in comparable sales and a 5% decline in store count [11][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][13] - Net loss was $19.4 million for the quarter compared to $14.5 million in the prior year quarter, with an adjusted net loss of $17.8 million compared to $13.9 million in the prior year [15] Business Line Data and Key Metrics Changes - E-commerce sales experienced a decline of 38.5% in comparable sales, significantly impacted by the tornado disruption, which negatively affected e-commerce sales by 750 basis points [12][16] - Store count had a slightly positive comparable sales growth, driven by increases in traffic and conversion, but was offset by lower average transaction values due to liquidation efforts [12] Market Data and Key Metrics Changes - The first Bed Bath & Beyond Home Store opened in Brentwood, Tennessee, with sales exceeding expectations and significant media coverage generating over 250 million impressions [5][7] - 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 in CapEx [8][9] Company Strategy and Development Direction - The partnership with Bed Bath & Beyond is central to the company's transformation, focusing on an omnichannel retail strategy that includes store conversions and expansion into wholesale markets [9][10] - The company aims 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][29] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges faced in the second quarter due to the tornado and liquidation efforts but expressed confidence in the future growth potential driven by the Bed Bath & Beyond brand [4][18] - The company expects to continue promotional activities and anticipates some incremental tariff costs beginning in the third quarter, while focusing on improving liquidity and funding conversions [18][37] 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][17] - Management is actively negotiating with vendors to mitigate tariff impacts and is shifting towards more domestic sourcing as part of the store conversion strategy [36][38] Q&A Session Summary Question: What were the conversion costs for the Brentwood store? - The CapEx for the Brentwood store was significantly less than projected, around $30,000, due to minimal renovations required [23] Question: How many of the existing locations will ultimately be converted? - The company plans to convert approximately 250 to 275 of the existing Kirkland's stores, with about 25 stores expected to close due to lease expirations [28][29] Question: When can the e-commerce business be expected to stabilize? - Management indicated that they are focusing on brick-and-mortar sales and expect e-commerce to normalize to earlier declines, prioritizing more profitable transactions [32] Question: What is the expected impact of tariffs in the back half of the year? - Tariff impacts are anticipated to be around 100 basis points in Q3, with limited impact expected in Q4 as the company continues to liquidate non-go-forward categories [39][40] Question: How many conversions are planned for 2026 versus 2027? - The company has placed buys for 30 conversions in the first quarter of 2026 and aims to maximize store conversions based on inventory availability [41][42]

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][13] - 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 the tornado disruption, which negatively affected e-commerce sales by 750 basis points [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 efforts [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 an omnichannel retail approach [10] - The company is strategically liquidating non-go-forward inventory to optimize category mix and prepare for store conversions [4][18] - Plans for expansion include the introduction of Bye Bye Baby stores and a wholesale market for Kirkland's Home [9] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges from the tornado disruption and ongoing liquidation efforts but expressed confidence in the brand's future and growth potential [3][4] - The company expects to continue promotional activities and manage tariff costs while focusing on brick-and-mortar sales [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] - The company is actively reviewing store locations for conversion and plans to close about 25 stores with natural lease expirations in January 2026 [27] Q&A Session Summary Question: Insights on Bed Bath conversions and costs - The conversion cost for the Brentwood store was approximately $30,000, significantly lower than the projected $100,000 [23] Question: Future store conversions and closures - The company plans to convert 250-275 of its existing Kirkland's stores, with about 25 stores expected to close due to lease expirations [28][29] Question: E-commerce momentum and stabilization - Management aims to normalize e-commerce sales while focusing on profitable brick-and-mortar transactions [32] Question: Tariff impacts on gross margin - Tariff impacts are expected to be around 100 basis points in Q3, with limited impact anticipated in Q4 [39] Question: Conversion timeline and store count for 2026 - The company has placed orders for 30 conversions in Q1 2026, aiming for a significant presence in the back-to-campus season [41]