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Kirkland's Stock Tumbles on Soft Q4 Sales & Lowered Outlook

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Shares of Kirkland's, Inc. KIRK lost 13.1% during the trading session on Mar 1, following the company’s unimpressive sales results for the fourth quarter and management’s curtailed view for fiscal 2018. The company’s fourth-quarter sales were hit by headwinds like challenges in the wall decor category, soft brick and mortar sales stemming from unfavorable channel mix, and some port constraints that dented product outflow in January.

These hurdles couldn’t be fully compensated by Kirkland’s strong seasonal products performance and solid sales-driving efforts like gift-giving initiatives and introducing products, among others. The disappointing fourth-quarter sales results compelled management to revise its earnings outlook for fiscal 2018. The company now envisions earnings to be nearly 24 cents per share, whereas adjusted earnings are expected to be roughly 38 cents. Earlier, management had projected earnings per share between 50 cents and 60 cents. Management’s updated guidance stands well below the current Zacks Consensus Estimate of 50 cents.

Well, shares of Kirkland’s, which belongs to the Retail – Home Furnishings industry, have lost close to 9% in the past three months, against the S&P 500’s growth of nearly 4%. That said, let’s delve deeper into the company’s sales results.

Q4 & FY18 Sales

Kirkland’s net sales for the 13-week period ended Feb 2, 2019, dipped 3.8% year over year to $216.1 million. The year-over-year comparison was hit by an additional week during the fourth quarter of fiscal 2017. On a comparable 13-week basis, comparable store sales or comps (including e-commerce) fell 3.3%, against 2% rise witnessed last year. Further, fiscal 2018 net sales came in at $647.1 million, up 2.1% from the year-ago period. On a 52-week comparison basis, comps (including e-commerce) declined 1.3%.

Though Kirkland’s fourth-quarter sales and lowered earnings outlook raise concerns, the company is focused on stabilizing its performance in 2019 on the back of prudent investments to aid top and bottom-line growth. Notably, this Zacks Rank #3 (Hold) company is committed toward undertaking omnichannel initiatives.

To this end, the company has redesigned and leveraged the rollout of new information systems to improve online purchase and planning execution. These efforts have been yielding significant results. Further, Kirkland’s is closing the smaller underperforming stores in the malls and expects to open bigger off-mall stores at popular locations to boost sales.  During the fourth quarter, Kirkland’s opened three stores and shuttered seven. In fiscal 2018, the company opened 25 stores, while it closed 15. At the year-end, Kirkland’s operated 428 stores.

Let’s see if these factors can help Kirkland’s revive investors’ confidence.

Don’t Miss These Solid Retail Bets

Boot Barn Holdings BOOT, with long-term earnings per share growth rate of 20.7%, flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Walmart WMT, with a Zacks Rank #2 (Buy), has long-term earnings per share growth rate of 5.3%.

Dollar Tree DLTR, another Zacks #2 Ranked stock, has long-term earnings per share growth rate of 13.8%.

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