NASHVILLE, Tenn. -- Kirkland's, Inc. (Nasdaq: KIRK), a specialty retailer of home décor and furnishings, announced financial results for the 13-week and 39-week periods ended October 28, 2023.
Third Quarter 2023 Summary
-- Net sales were $116.4 million, with comparable sales decreasing 9.2%.
-- Gross profit margin improved 130 basis points year-over-year to 26.3%.
-- Operating loss was flat year-over-year at $6.7 million.
-- Adjusted EBITDA loss of $3.2 million.
-- Ended the period with a cash balance of $5.8 million and $62.0 million in outstanding debt.
-- Closed one store and relocated one store to end the quarter with 339 stores.
Management Commentary
"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 of Kirkland's Home. "Over the last 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. During the quarter, we saw promising indicators that our pivots are beginning to work. We increased lapsed customer reactivations, drove improved traffic and conversion with less promotional activity, reduced operating expenses, and improved our inventory position for the remainder of the year.
"While persistent challenges in the macro-economy continue to weigh on consumers, we believe that our renewed emphasis on value and seasonally relevant décor is beginning to resonate with our customers. In fact, the trend continued into the fiscal fourth quarter, which has started off with a low single-digit increase in comparable sales for the month of November at a much-improved merchandise margin as we continue to execute against our holiday promotional strategy.
"Although there is still much work to be done, we are optimistic and encouraged by our recent improvements. We expect solid year-over-year improvement in profitability during the fourth quarter as we continue to progress towards our goal of returning to our historical average adjusted EBITDA margin in the mid-to-high single-digit range. In fiscal 2024, we will look to build off this recent momentum and continue to execute upon our strategy to return the Company to profitable growth."
Third Quarter 2023 Financial Results
Net sales in the third quarter of 2023 were $116.4 million, compared to $131.0 million in the prior year quarter. Comparable same-store sales decreased 9.2%, including an 8.5% decline in e-commerce sales. The decrease was primarily driven by a decline in traffic and a decrease in average ticket, partially offset by increased conversion.
Gross profit in the third quarter of 2023 was $30.7 million, or 26.3% of net sales, compared to $32.7 million, or 25.0% of net sales in the prior year quarter. The improvement as a percentage of net sales was primarily a result of improved merchandise margin, partially offset by the deleverage of fixed cost components on the lower sales base.
Operating loss in the third quarter of 2023 and 2022 remained consistent at $6.7 million, as lower operating costs, including reduced corporate compensation expense, offset the decline in gross profit dollars.
EBITDA in the third quarter of 2023 was a loss of $3.9 million compared to a loss of $2.6 million in the prior year quarter. Adjusted EBITDA in the third quarter of 2023 was a loss of $3.2 million compared to a loss of $1.7 million in the prior year quarter.
Net loss in the third quarter of 2023 improved to $6.4 million, or a loss of $0.50 per diluted share, compared to a net loss of $7.3 million, or a loss of $0.58 per diluted share in the prior year quarter.
As of October 28, 2023, the Company had a cash balance of $5.8 million, with $62.0 million of outstanding debt under its $90.0 million senior secured revolving credit facility. As of November 30, 2023, the Company had $35.0 million of outstanding debt under its senior secured revolving credit facility.