NASHVILLE, Tenn. — Specialty home décor and furnishings retailer Kirkland’s Home is banking on “promising indicators that our pivots are beginning to work” to turnaround what has been a challenging year.
In its third quarter earnings report, Kirkland’s Inc. reported net sales of $116.4 million compared with $131 million in the prior year quarter. Comparable sales also decreased by 9.2%, including an 8.5% fall in e-commerce, but were ahead of Q2 results, when comp sales were down 9.7% and e-commerce declined 16.6%
Adjusted EBITDA for the quarter was a loss of $3.2 million compared with $1.7 million the same quarter in 2022. Net loss for Q3 improved to $6.4 million, or 50 cents per diluted share vs. $7.3 million and a loss of $0.58 per diluted share the prior year.
“The third quarter demonstrated execution of our strategic repositioning as we experienced sequential improvements in traffic and comparable sales each month of the quarter, along with expanded gross margins,” said Ann Joyce, interim CEO. Gross margin improved by 130 basis points year-over-year to 26.3%.
“Over the past six months, we have spent a significant amount of time assessing every aspect of the business and acted quickly to implement changes to better position us going into our ever-important holiday selling season,” she said. Among the steps taken, said Joyce, were increasing lapsed customer reactivations, driving improved traffic and conversion with fewer promotions, reducing operating expenses and improving inventory position.
Inventory was down 17% in Q3 vs. the same period last year, said Joyce.
Joyce said the company’s emphasis on value and seasonal merchandise “is beginning to resonate with our customers,” and the trend going into the fourth quarter includes “a low single-digit increase in comparable sales for November at a much-improved merchandise margin.”
During the earnings call, Joyce noted that while decorative accessories were a standout, with sales up 8% for the quarter, the company is still using a higher level of discounts for big ticket items such as furniture and wall décor.
Furniture and wall décor will remain part of the mix, but those items as a percentage of inventory will likely decrease. And while there is residual inventory, especially in wall décor and art, the company isn’t concerned about it having an impact going into 2024.
During the quarter, the retailer closed one store and relocated another to end Q3 with 339 stores. Kirkland’s also closed its two e-commerce hubs, which were consolidated at its Jackson, Tenn., facility.