Kirkland's Warns Of Going Concern Risk After Weak Q4; Stock Sinks
Kirkland’s Inc. (NASDAQ:KIRK) shares plunged on Thursday after the company reported disappointing fourth-quarter 2024 results and warned of substantial doubt over its ability to continue as a going concern.
Fourth-quarter sales fell 10.3% year-over-year to $148.8 million, missing estimates of $150.09 million. Comparable sales dropped 0.6%, with a 1.6% lift in-store offset by a 7.9% decline in e-commerce.
The decline was driven by the absence of a 53rd week in fiscal 2023, a ~4% store count reduction, and weak online traffic and order values.
Adjusted EPS for the quarter declined to 54 cents from 82 cents a year ago, below the consensus of 59 cents.
Gross profit slid to $45.1 million (30.3% margin) from $53 million (32%) due to lower merchandise margins and occupancy cost pressures, partly offset by reduced freight expenses.
Operating income dropped to $9.2 million from $10.7 million, while adjusted EBITDA came in at $11.98 million, down from $14.2 million. Margins narrowed 50 basis points to 8.1%.
As of February 1, 2025, Inventory rose 10.5% to $81.9 million as planned increases and slower Q4 sell-through built up stock levels. Cash stood at $3.8 million, with $43 million drawn from its $90 million credit line and $17 million owed to Beyond, Inc.
Net cash used in operations for the year reached $19.3 million, up from $14.5 million a year ago. The company ended the year with 317 stores.
“While the current environment has become increasingly challenging with the uncertainty around tariffs and the potential impact on consumer behavior, we are executing strategies to navigate the tariff impact while maximizing the assets available to us to accelerate a capital light store conversion strategy that leverages our full house of brands to deliver style and value,” commented Amy Sullivan, CEO of Kirkland.
“We have identified the first of many potential store conversions under the Bed Bath & Beyond Home and Overstock banners that we believe will not only drive stronger brand awareness and customer acquisition but also support our ongoing transformation efforts,” added Sullivan.
The company said it is actively working to offset the impact of current tariff policies and improve cash flow but acknowledged there is substantial doubt about its ability to continue as a going concern over the next 12 months.
Due to this uncertainty, the company is currently out of compliance with credit covenants but expects to secure waivers from lenders as part of the financing that is anticipated to close next week.
Price Action: KIRK shares are trading lower by 9.71% at $1.25 at the last check on Thursday.
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