Kirkland's (KIRK) Tops Q2 EPS by 13c; Revises FY Outlook

August 26, 2009 7:21 AM EDT

Kirkland's, Inc. (Nasdaq: KIRK) reports Q2 EPS of $0.17, 13 cents better than estimates. Revenues were $87.7 million vs. $83.85 million consensus.

Fiscal 2009 Outlook More Positive on First Half Results

Based on the Company's better-than-expected first half performance compared with its initial targets and expectations for fiscal 2009, the Company has revised its assumptions for several key metrics as noted below. These assumptions discount the likelihood of a return to the severe economic conditions of last fall, but do allow for the potential that the current recession could negatively impact the holiday selling season.

Store Base: The Company started fiscal 2009 with 299 stores compared with 335 stores a year ago. For fiscal 2009, the store base is expected to average approximately 30 stores less per quarter than the comparable quarters of fiscal 2008. In accordance with the Company's plan to reposition its store base, closings from natural lease expirations are expected to be approximately 35 to 40 stores. New store openings are expected to be 15 to 18 stores in fiscal 2009, with the remaining openings occurring in the late third and early fourth quarters.

Net Sales: Full year sales are expected to be equal to or moderately below fiscal 2008 despite a smaller store base throughout the year.

Margins: Full year merchandise and operating margins are expected to be above fiscal 2008 levels. If second half comparable store sales trends remain positive, we would expect strong year-over-year improvement in margins, but not to the levels experienced in the first half of fiscal 2009. Should comparable store sales begin to moderate in the second half of the year, we still would expect improvement in merchandise and operating margins for fiscal 2009.

Earnings: Full year pre-tax earnings, which will continue to be the most relevant measurement of business performance in fiscal 2009, are expected to be significantly above the $10.1 million achieved in fiscal 2008. The magnitude of the improvement will be largely determined by the comparable sales growth and margin trends in the second half of the year. The Company's income tax rate will remain difficult to model in fiscal 2009 due to the remaining valuation allowance on deferred tax assets and the accounting rules that govern the timing of any changes to the amount of the valuation allowance. Our current expectation is for a full year effective tax rate of approximately 22%.

Cash Flow: The Company expects to generate positive cash flow for the year with no borrowings expected on its revolving line of credit. Through the first half of fiscal 2009, the Company has generated $6.7 million in cash flow from operations and raised its cash balance from $36.4 million at fiscal year end to $38.5 million as of August 1, 2009. Capital expenditures are estimated to range between $9 and $10 million, primarily to fund new store construction and information technology projects. We expect to continue to fund these capital investments through cash generated from operations.

[SM]

Related Categories

Earnings
Guidance

Stocks Mentioned

Add Your Comment

Name

Subject

Body

Verification can't see the text?
click here to refresh the image.
what's this?