Home accessories retailer Kirkland's, Inc. (KIRK) Friday reported a profit for the third quarter, as compared to a loss last year. Profit for the quarter reflected higher sales and lower depreciation and amortisation costs.
For the third quarter, the Nashville, Tennessee-based company's net income was $5.57 million or $0.27 per share compared with a loss of $1.47 million or $0.07 per share in the prior-year period.
On an adjusted basis, net income was $4.62 million or $0.23 per share, versus a loss of $853 thousand or $0.04 per share last year. Adjusted results exclude adjustments with regard to valuation allowance for deferred tax assets and income tax credits related to prior periods.
Analysts polled by Thomson Reuters expected Kirkland's to report earnings of $0.08 per share for the quarter. Analysts' estimates typically exclude special items.
Net sales for the period increased 7.6% to $92.39 million from $85.88 million in the third quarter of fiscal 2008. Analysts expected the company to generate revenues of $85.99 million for the quarter.
Comparable store sales for period rose 11.3% compared with an increase of 1.2% in the prior-year period. Comparable store sales in off-mall stores increased 11.2% for the quarter, and comparable store sales in mall stores rose 11.7%.
Commenting on the results, chief executive officer Robert Alderson said, "The execution of our merchandise and store operating plans yielded strong sales and margin improvement due to improved conversion and reduced markdown activity."
During the 13-week period, depreciation and amortisation costs were $3.53 million, versus $4.69 million in the same quarter last year. Other operating expenses for the quarter rose to $26.97 million from $25.46 million a year earlier.
In the third quarter of 2009, Kirkland's opened seven stores and closed two stores, ending the period with 296 stores.
For the 39-week period, net earnings were $12.49 million or $0.62 per share, as compared with a net loss of $5.72 million or $0.29 per share in the corresponding period prior year. Adjusted net profit for the period was $9.93 million or $0.49 per share versus an adjusted net loss of $3.46 million or $0.18 per share last year. Year-to-date net sales increased 2.2% to $263.40 million from $257.64 million in the 2008-year period.
During the 39-week period, the company opened 15 stores and closed 18 stores.
Looking ahead to full year 2009, Kirkland's expects pre-tax earnings to be significantly above $10.1 million in pre-tax earnings achieved in fiscal 2008, and also anticipates that full year sales will be slightly above fiscal 2008. The company sees to generate positive cash flow for the year with no borrowings expected on its revolving line of credit.
Full-year merchandise and operating margins are estimated to be significantly above fiscal 2008 levels, with fiscal 2009 operating margin approaching 10%.
Store base is expected to average about 30 stores less per quarter than the comparable quarters of fiscal 2008. In relation to the company's plan to reposition its store base, closings from natural lease expirations are seen to be around 35 stores. New store openings are estimated to be 18 stores in fiscal 2009.
For fiscal 2010, Kirkland's expects to open 30 to 40 new stores and close 15 to 20 stores. The company also sees to generate positive cash flow in 2010 while fully funding all store growth and other capital needs from operations.
In Thursday's regular trading session, KIRK closed trading on the Nasdaq at $13.28 per share on a volume of 17,320 shares. In the 52-week period, the shares have been trading in the range of $1.75 - $15.74.
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