Kirkland's(KIRK) - 2019 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net sales for Q3 2019 decreased by 6.2% or $9.6 million compared to the same quarter in the prior year, with comparable store sales down by 6.4% [29] - Gross profit margin decreased by 250 basis points to 27.7%, with merchandise margin down by 360 basis points to 51.8% due to product mix and increased discounting [32] - The company recorded a net loss of $1.61 per diluted share, compared to a net loss of $0.18 per diluted share in the prior year [39] Business Line Data and Key Metrics Changes - E-commerce revenue increased by 25.9%, accounting for $23.5 million or approximately 16% of total revenue, while brick-and-mortar sales experienced a double-digit decline [29][31] - E-commerce sales fulfillment in-store accounted for over 53% of e-commerce sales, indicating a shift towards a more profitable omni-channel model [31][20] Market Data and Key Metrics Changes - Brick-and-mortar traffic remained weak, primarily driving the decline in comparable store sales, influenced by macro channel shifts and a promotional environment [30] - Store occupancy costs deleveraged by 25 basis points due to the decline in brick-and-mortar sales, with ongoing efforts to renegotiate leases and close underperforming stores [34] Company Strategy and Development Direction - The company is focusing on transforming its business model to support profitability through better merchandising, marketing, and supply chain efficiency [17][18] - Plans include optimizing the store footprint, enhancing e-commerce capabilities, and implementing a direct sourcing model to improve margins [18][24] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges faced in Q3 but expressed optimism about progress in key areas and the potential for improved profitability in 2020 and beyond [46] - The company expects to end the year in a net positive cash position and is focused on lowering occupancy and operating costs [15][41] Other Important Information - The company recorded an impairment charge of $3.4 million related to 17 store impairments and a tax valuation allowance of $11.3 million due to estimated pre-tax losses [38] - Capital expenditures were reduced to $12.8 million compared to $25 million in the prior year, with a focus on e-commerce and supply chain initiatives [44] Q&A Session Summary - No specific questions or answers were documented in the provided content, indicating the conclusion of the conference call without a detailed Q&A segment [48]