Announces Decisive Transformation, Corporate Reorganization, and Changes to the Board of Directors

, /PRNewswire/ -- Kirkland's, Inc. (Nasdaq: KIRK) ("Kirkland's" or the "Company"), a multi-brand specialty retailer of home décor, housewares and furnishings, announced financial results for the 13-week period ended May 3, 2025.

First Quarter 2025 Summary

• Net sales of $81.5 million; consolidated comparable sales decreased 8.9%, inclusive of comparable store decline of 3.1% and e-commerce decline of 26.7% compared to the first quarter of fiscal 2024.
• Gross profit margin of 24.9%.
• Operating loss of $10.5 million.
• Adjusted EBITDA loss of $7.9 million.
• Closed 3 stores during the period to end the quarter with 314 stores.

Management Commentary

Amy Sullivan, CEO of Kirkland's, said, "Like many in retail, our first quarter performance was impacted by weather and the continued softness in consumer sentiment. Despite these challenges, we saw improvements in our store performance for the combined March and April period. While our e-commerce business remains pressured, and was exacerbated in late May by weather-related disruptions in our Jackson, Tennessee distribution center, we continue to see momentum in our Kirkland's Home stores which saw comparable store sales up approximately 3% versus last year for the month of May. While encouraged by our store performance, it is time to accelerate our transformation. We have already begun to take actions in moving excess and slower turning inventory in the first quarter and will continue the elimination of underperforming assets as we expand the utilization of our Bed Bath & Beyond, Overstock and buybuy Baby licenses."

Ms. Sullivan continued, "As announced today, we are entering a new era in our organization as we reimagine our future as a multi-brand retail operator maximizing our partnership with Beyond. We are realigning our business to drive performance and profitability - strengthening our team, sharpening our operational discipline to improve inventory productivity, and accelerating the brand conversion or closure of underperforming assets across our portfolio. While we expect these decisive actions and the optimization of our assets to impact near-term performance, we believe rebuilding our foundation will unlock significant operating leverage, drive sustainable profitable growth and create long-term value for our shareholders."

First Quarter 2025 Financial Results

Net sales in the first quarter of 2025 were $81.5 million, compared to $91.8 million in the prior year quarter. The decrease was primarily driven by a decline in e-commerce sales and comparable store sales, along with a decline in store count of approximately 5%. Comparable sales decreased 8.9% compared to the first quarter of 2024, including a 3.1% decrease in comparable store sales and a 26.7% decline in e-commerce sales. The decrease in comparable sales was primarily driven by a decrease in consolidated average ticket and e-commerce traffic, partially offset by an increase in store conversion.

Gross profit in the first quarter of 2025 was $20.3 million, or 24.9% of net sales, compared to $27.1 million, or 29.5% of net sales in the prior year quarter. The decline is primarily a result of lower merchandise margins, due to higher promotional activity, and the deleverage of store occupancy costs, partially offset by lower outbound freight costs.

Operating expenses in the first quarter of 2025 were $30.8 million, or 37.8% of net sales, compared to $34.6 million, or 37.7% of net sales in the prior year quarter. The decline in operating expenses was driven by lower store and corporate compensation and benefits expenses, reduced advertising costs and lower consulting costs.

Operating loss in the first quarter of 2025 was $10.5 million compared to $7.5 million in the prior year quarter. Adjusted operating loss in the first quarter of 2025 was $10.0 million compared to $7.1 million in the prior year quarter. Adjusted operating loss removes the impact of asset impairment, stock-based compensation expense, severance charges and any financing related legal or professional fees that, due to their nature, did not qualify for capitalization as deferred debt or equity issuance costs.

Net loss in the first quarter of 2025 was $11.8 million, or a loss of $0.54 per diluted share, compared to $8.8 million, or a loss of $0.68 per diluted share in the prior year quarter. Diluted weighted average shares outstanding in the first quarter of 2025 were approximately 22.1 million compared to 13.0 million in the prior year quarter, mainly due to Beyond, Inc. ("Beyond") acquiring approximately 8.9 million shares of common stock in the Company.

EBITDA in the first quarter of 2025 was a loss of $8.4 million compared to a loss of $4.9 million in the prior year quarter. Adjusted EBITDA in the first quarter of 2025 was a loss of $7.9 million compared to a loss of $4.5 million in the prior year quarter. Adjusted EBITDA removes the impact of asset impairment, stock-based compensation expense, severance charges and any financing related legal or professional fees that, due to their nature, did not qualify for capitalization as deferred debt or equity issuance costs.

Adjusted diluted net loss in the first quarter of 2025 was $11.3 million, or an adjusted loss of $0.51 per diluted share, compared to adjusted net loss of $8.4 million, or an adjusted loss of $0.65 per diluted share in the prior year quarter. Adjusted net loss removes the impact of asset impairment, stock-based compensation expense, severance charges and any financing related legal or professional fees not subject to capitalization.

Balance Sheet

As of May 3, 2025, inventory was $76.4 million, a 0.8% increase compared to the prior year period.

As of May 3, 2025, the Company had a cash balance of $3.5 million, with $38.9 million of outstanding debt and $5.1 million in outstanding letters of credit under its senior secured revolving credit facility and $8.5 million in debt to Beyond a related party and 40% owner of the Company. As of May 3, 2025, the Company had minimal availability for borrowing under the revolving credit facility, after the minimum required excess availability covenant.

Availability under the Company's revolving credit facility fluctuates largely based on eligible inventory levels, and as eligible inventory increases in the second and third fiscal quarters in support of the Company's back-half sales plans, the Company's borrowing capacity increases correspondingly.

Credit Agreement Expansion

On May 7, 2025, the Company closed a $5.2 million expansion of the existing credit agreement with Beyond and amended existing transactions and collaboration agreements previously entered into between the companies.

In connection with the financing, Kirkland's has also received a waiver from both its lenders, Bank of America, N.A. and Beyond as expected per the recent Form 8-K filing on May 1, 2025. The Company's senior credit agreement with Bank of America, N.A. was also amended to permit Beyond to acquire up to 65% of the outstanding capital stock of the Company. In addition to the expanded credit facility, Beyond and the Company have entered into a purchase agreement providing for the future sale of the Company's intellectual property to Beyond, subject to senior lender approvals.

As of June 17, 2025, the Company had $38.8 million of outstanding debt and $5.1 million of outstanding letters of credit under its revolving credit facility with minimal availability, after the minimum required excess availability covenant, and $13.7 million in term loans to Beyond.

Jackson, Tennessee Distribution Center Disruption

On May 20, 2025, a tornado hit the Company's leased Jackson, Tennessee distribution center, causing damage to the Company's assets and disruptions to the Company's operations, particularly with respect to its e-commerce channel. The Company maintains insurance policies to cover the repair or replacement of the Company's assets that suffered loss or damage, and the Company is working closely with its insurance carriers to ascertain the full amount of insurance proceeds, net of the deductible on the policies, due to the Company as a result of the damages and interruption to its business. At this time, the amount of combined property damage and business interruption costs and recoveries cannot be estimated.

Transformative Operational Reset, Corporate Rebranding and Changes to the Board of Directors

Today, in a separate announcement, the Company announced a number of operational and leadership changes focused on driving transformation, performance and profitability. The Company detailed its plans to rebrand Kirkland's, Inc. to The Brand House Collective reflecting the Company's transformation into a multi-brand merchandising, supply chain and retail operator leading the brick & mortar vision and strategy for Beyond's growing portfolio of iconic home and family brands. Kirkland's, Inc. plans to officially change its corporate name from "Kirkland's, Inc." to "The Brand House Collective, Inc." pending shareholder approval at the Company's upcoming annual meeting on July 24, 2025. In conjunction with its corporate name change, the Company's ticker symbol on the Nasdaq Global Select Market from "KIRK" to "TBHC". Once effective, the "KIRK" trading symbol will no longer be active. No action is needed from the Company's current shareholders relative to the ticker symbol change.

In addition, the Company announced changes to its Board of Directors. The press release is available in the investor relations section of the Company's website at www.kirklands.com.

Conference Call

Given the strategic and organizational changes the Company is undergoing, the Company has cancelled its first quarter fiscal 2025 results conference call, originally scheduled for today, June 17, 2025 at 9:00 a.m. Eastern Time.

About Kirkland's, Inc.

Kirkland's, Inc. is a specialty retailer of home décor and furnishings in the United States, currently operating 313 stores in 35 states as well as an e-commerce website, www.kirklands.com, under the Kirkland's Home brand. The Company provides its customers an engaging shopping experience characterized by a curated, affordable selection of home décor and furnishings along with inspirational design ideas. This combination of quality and stylish merchandise, value pricing and a stimulating in-store and online environment provides the Company's customers with a unique brand experience. More information can be found at www.kirklands.com.

Forward-Looking Statements

Except for historical information contained herein, certain statements in this release, constitute forward-looking statements that are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to the finalization of the Company's quarterly financial and accounting procedures. Forward-looking statements deal with potential future circumstances and developments and are, accordingly, forward-looking in nature. You are cautioned that such forward-looking statements, which may be identified by words such as "anticipate," "believe," "expect," "estimate," "intend," "plan," "seek," "may," "could," "strategy," and similar expressions, involve known and unknown risks and uncertainties, many of which are outside of the Company's control, which may cause the Company's actual results to differ materially from forecasted results. Those risks and uncertainties include, among other things, risks associated with the effect of the transactions entered into with Beyond (the "Transactions") on the Company's business relationships; operating results and business generally; unexpected costs, charges or expenses resulting from the Transactions; potential litigation relating to the Transactions that could be instituted against Beyond, the Company or their affiliates' respective directors, managers or officers, including the effects of any outcomes related thereto; continued availability of capital and financing; the ability to obtain the various synergies envisioned between the Company and Beyond; the ability of the Company to successfully open new stores or rebrand existing Kirkland's Home stores under a Bed Bath & Beyond Home or other licensed brand; the ability of the Company to successfully market its products to new customers and expand through new e-commerce platforms and to implement its plans, forecasts and other expectations with respect to its business after the completion of the Transactions and realize additional opportunities for growth and innovation; risks associated with the Company's liquidity including cash flows from operations and the amount of borrowings under the secured revolving credit facility; the fact that our independent registered public accounting firm's report for the year ended February 1, 2025 is qualified as to our ability to continue as a going concern; the Company's ability to successfully implement cost savings and other strategic initiatives intended to improve operating results and liquidity positions; the Company's actual and anticipated progress towards its short-term and long-term objectives including its multi-brand and omni-channel strategy; the risk that natural disasters, pandemic outbreaks, global political events, war and terrorism could impact the Company's revenues, inventory and supply chain; the continuing consumer impact of inflation and countermeasures, including high interest rates; the effectiveness of the Company's marketing campaigns; risks related to changes in U.S. policy related to imported merchandise, particularly with regard to the impact of tariffs on goods imported from China and strategies undertaken to mitigate such impact; the Company's ability to retain its senior management team; volatility in the price of the Company's common stock, the competitive environment in the home décor industry in general and in the Company's specific market areas; inflation, fluctuations in cost and availability of inventory; increased transportation costs and potential interruptions in supply chain, distribution systems and delivery network, including the Company's e-commerce systems and channels; the ability to control employment and other operating costs; availability of suitable retail locations and other growth opportunities; disruptions in information technology systems including the potential for security breaches of the Company's information or its customers' information, seasonal fluctuations in consumer spending, and economic conditions in general. Those and other risks are more fully described in the Company's filings with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K filed on May 2, 2025, as amended on May 30, 2025, and subsequent reports. Forward-looking statements included in this release are made as of the date of this release. Any changes in assumptions or factors on which such statements are based could produce materially different results. Except as required by law, the Company disclaims any obligation to update any such factors or to publicly announce results of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.

Non-GAAP Financial Measures

To supplement our unaudited consolidated condensed financial statements presented in accordance with generally accepted accounting principles ("GAAP"), this earnings release contains certain non-GAAP financial measures, including EBITDA, adjusted EBITDA, adjusted operating loss, adjusted net loss and adjusted diluted loss per share. These measures are not in accordance with, and are not intended as alternatives to, GAAP financial measures. The Company uses these non-GAAP financial measures internally in analyzing our financial results and believes that they provide useful information to analysts and investors, as a supplement to GAAP financial measures, in evaluating the Company's operational performance.

The Company defines EBITDA as net loss before income tax expense, interest expense, other income and depreciation. Adjusted EBITDA is defined as EBITDA adjusted to remove asset impairment, stock-based compensation expense, due to the non-cash nature of this expense, severance charges, as it fluctuates based on the needs of the business and does not represent a normal recurring operating expense, and any financing related legal or professional fees that, due to their nature, did not qualify for capitalization as deferred debt or equity issuance costs.

Adjusted operating loss is defined as operating loss adjusted for asset impairment, stock-based compensation expense, severance charges and financing related legal or professional fees not qualifying for capitalization. The Company defines adjusted net loss as net loss adjusted for asset impairment, stock-based compensation expense, severance charges, financing related legal or professional fees not qualifying for capitalization and the related tax adjustments. The Company defines adjusted loss per diluted share as adjusted net loss divided by weighted average diluted share count.

Non-GAAP financial measures are intended to provide additional information only and do not have any standard meanings prescribed by GAAP. Use of these terms may differ from similar measures reported by other companies. Each non-GAAP financial measure has its limitations as an analytical tool, and you should not consider them in isolation or as a substitute for analysis of the Company's results as reported under GAAP.

The following table shows an unaudited non-GAAP measure reconciliation of net loss to EBITDA and adjusted EBITDA (in thousands) for the periods indicated:

The following table shows an unaudited non-GAAP measure reconciliation of operating loss to adjusted operating loss (in thousands) for the periods indicated:

The following table shows an unaudited non-GAAP measure reconciliation of net loss and diluted loss per share to adjusted net loss and adjusted diluted loss per share (in thousands, except per share data) for the periods indicated:

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SOURCE Kirkland's, Inc.