Q4 2023 Kirkland's Inc Earnings Call

Participants

Jeremy Hamblin; Analyst; Craig-Hallum Capital Group LLC

John Lawrence; Analyst; The Benchmark Company, LLC.

Presentation

Operator

Good morning, everyone, and thank you for participating in today's conference call to discuss wins financial results for the fourth quarter in fiscal year 2023 ended February 3, 2024. Joining us today are Kirkland's Holmes CEO, Amy Sullivan; EVP and CFO. Mike Madden; and the company's external Director of Investor Relations. Cody Cree. Following their remarks, we'll open the call for your questions. Please note, this call is being recorded.
Before we go further, I would like to turn the call over to Mr. Cree as he reads companies Safe Harbor states within the meanings of the Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements.

Except for historical information discussed during this conference call, the statements made by Company management are forward-looking and made pursuant to the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause Kirkland's actual results in future periods to differ materially from forecasted results Those risks and uncertainties are more fully described in Kirkland's filings with the Securities and Exchange Commission.
I'd like to remind everyone that this call will be available free telco replay through March 28, 2024. A webcast replay will also be available via the link provided in today's press release as well as on the Company's website at Kirkland's.com.
Now I'd like to turn the call over to Kirkland CEO. Amy Sullivan, over to you.

Thank you, Cody, and good morning, everyone. It's great to be joining today's call. As the new CEO of Kirkland's home. I'm incredibly excited and the opportunity at hand to restore our business to historical levels of operating performance and ultimately reach new heights.
Having spent more than a decade of my career at this great company in various leadership roles, I've had the opportunity to see what works and what doesn't work. The strategic repositioning initiatives that we've implemented during the past year are centered around returning to our value heritage. These initiatives are a modernized version of a previous playbook that consistently delivered healthy results, and we believe we can achieve those results again.
Although our financial performance has lagged for some time, I wanted to remind everyone of the brand power we have as the original Parkland with a strong following built over 50 years. This has culminated into over 1 million followers on both Instagram and Facebook, over 7 million customer transactions per year and more than 18 million customers in our loyalty program. We remain optimistic that with the right strategy in place, we can unlock significant value from our powerful Kirkland brand.
With that broader framework in mind, let's jump into how we closed out the year and the progress we're making towards our five strategic priorities. Fiscal 2023 was a year of significant change across our entire organization. And we are proud to report that we fall some of our initial repositioning strategy to take hold during the holiday season going into this period compared to the same period last year, we had improved marketing, relevant merchandising, more appropriate levels of inventory and a more effective pricing and promotion strategy.
As a result, we generated a 1.7% increase in our comparable sales, a strong gross profit margin of 32%, adjusted EBITDA of $14.2 million and healthy operating cash flow if it weren't for the significant weather in January that impacted much of our retail footprint, we would have likely seen a positive sales comp closer to 3%, although we are in the early stages of our strategic repositioning. We are pleased with the momentum we generated to close out the year, which gives us confidence that we are on the right path. We believe we can now take these learnings and continue implementing them in 2024 and beyond to get our business back on track.
Let's dive into how our five strategic priorities played out in Q4 and what we have in store this year. First and foremost, it is imperative. We keep the voice of the customer at the center of our brand and our strategy as we all know, consumers continue to deal with uncertainties in the broader macro environment and remain price sensitive.
While this environment does create challenges for us, it also presents a great opportunity to lean into our value-focused heritage, which is resonating with customers. We saw this during holiday as our brand repositioning took hold, driving a 39% reactivation of lapsed customers. We believe our revitalized merchandising and marketing strategy will keep her engaged throughout the year with the customer at the center of our decision making.
We are beginning to see success in many of the pivots within our marketing strategy. As we shared previously, we recalibrated our marketing tactics to reengage our core customer and more specifically to focus our efforts on previously declining brick-and-mortar traffic. We are pleased with the improvement in our store traffic trends shifting from down 10% in the first half of the year to up 2% in Q4, largely driven by geo-targeting in our paid media strategy and the reintroduction of direct mail.
Additionally, I'm excited to share that we have formalized an exclusive partnership with a digital marketing technology partner. We worked with this partner in Q4 to test video SMS, resulting in a 75% increase in click-through rate compared to our traditional text SMS program. We plan to utilize this new technology to drive increased customer engagement around new product launches and promotional events.
As we look ahead to 2024, we expect continued benefits from our reactivation strategies. We will remain nimble in our marketing tactics to ensure we are efficiently managing traffic conversion and acquisition tools to solidify a balanced approach to our brand strategy.
Our second strategic priority is our commitment to being product obsessed by delivering curated, on-trend and seasonally relevant home decor at a great price. We have brought back on always something new mindset and our customer is responding well, although larger ticket categories such as furniture and wall decor continue to struggle. We are turning lower ticket categories like decorative accessories, holiday and gifting much faster. Decorative accessories exceeded our expectations during the holiday season with a 60% sales comp, providing a perfect example of a value to core category that can drive business year-round.
Additionally, we reintroduced our gift and impulse category in Q4, which delivered incremental sales that we can now capitalize on in all four quarters. Our holiday assortment was very well received for this year, delivering a 2% sales comp and 13% margin comp, largely driven by strong demand in floral decor and textiles, further solidifying our customers' passion for decorating. We expect growth from all three of these categories throughout the year.
Now I want to turn to our third strategic priority, delivering an omnichannel strategy that meet her whenever and wherever she wants to shop. As I shared earlier, we are seeing a positive trend in store traffic from our marketing and merchandising repositionings. While we have plenty of opportunity to maximize brick and mortar sales through continued execution, our e-commerce business has much more strategic and structural work to be done in order to capture its full potential.
There has certainly been a channel shift among consumers back to in-store, but over the long term, we believe in the necessity of a strong e-commerce channel within our overall brand experience, traffic within e-commerce has continued to be challenging. Some of this is due to that macro shift, but some of it is certainly self-inflicted as we realigned our marketing dollars to better support the larger brick-and-mortar channel.
Additionally, the price resistance to higher ticket categories such as furniture and wall decor has a larger impact to our e-commerce business as those categories have generally been a greater percentage of our online sales over the years. The Kirkland's e-commerce strategy has largely been a subset of the brick and mortar strategy.
But in our commitment to keeping our customer at the center of our brand, we recognize the need to uniquely refine the assortments, promotional marketing and technology experience for online journey. Given our need to improve our online customer experience with modern technology, we are currently in a formal vendor selection process for re-platform with the goal of a fiscal 2025 relaunch.
In the meantime, we are focused on maximizing conversion and profitability on our existing sites. We have created an internal sales task force focused on optimizing inventory, marketing tactics and promotional strategies to drive e-commerce conversion and a profitability team on refining our shipping and returns process. Overall, we are working on ways to reignite our existing e-commerce business with the ultimate goal of a replatform next year.
Turning to the in-store component of our omnichannel strategy, we are pleased with how our stores have performed throughout 2023, we closed several unprofitable stores that were in locations we felt were not worth salvaging. As we look at our 2024 brick and mortar priorities. We are working to increase our revenue per square foot within our current footprint, with our return to positive traffic, consistent improvement and conversions and faster turning product mix, we believe our in-store opportunity could be an accelerant.
We are in the midst of evaluating operating hours across all our stores right now. And we are testing strategies that include opening earlier and saying than later based on current traffic and customer data trends. While it is too early to comment on specific our changes, we are using this testing period to ensure that we aren't leaving any additional profitable sales on the table.
And finally, within our omnichannel strategy, there are a few key expansion initiatives that we are exploring. For example, we are looking at a few markets we previously exited that might be beneficial to us as we reengage our core customer. We are in the early stages with our real estate partners, but we have narrowed in on markets that have incremental growth opportunities based on historic sales and current customer demographics. Overall, we are pleased with our brick-and-mortar results and see it as a leading indicator that the customers engaged with our strategic repositioning.
Now let's discuss the fourth strategy, maintaining disciplined operational effectiveness. With every new initiative and expense that we introduce, we are maintaining a strict discipline to ensure we can see a measurable benefit to our overall profitability. For now, we remain highly focused on implementing the must-have versus a nice-to-have as fiscal responsibility and low risk are key in the short term.
More recently, we have invested in improving our planning allocation and pricing and promotion strategy to better forecast what drives traffic and profitable sales. This is the latest health check, and we believe this is an investment that will provide a return this year. This promotional effectiveness tool, coupled with a more disciplined approach to a brand calendar, should aid us an overall control of margin, including our clearance markdown strategy resulting in potential meaningful upside this year.
The long-term impact of this implementation will leave the merchants and marketers with a tool to drive into future promotional strategies well in advance of the buying process, driving better management of our in-season sales and profitability.
We're also evaluating our overall inventory effectiveness to ensure we have the right inventory in the best location at the optimal time to maximize sales and margin through deep analysis of our product lifecycle and current store allocation clusters. We believe there is an opportunity to improve overall inventory turns and profitability by not doing this effectively. We've left margin on the table.
So this could be a significant margin driver for our business going forward. The initial impact of this work will begin to flow through our results in the back half of 2024, but the long-term impact will deliver better inventory optimization, starting with the buying process through the full product lifecycle.
Last but certainly not least, our first priority is focused on driving a high-performance organization built for success and continuity with the voice of our associates at the forefront of our culture as we close out 2023 and embark on a new year. I want to recognize and thank all of our associates for their unwavering dedication to our turnaround.
The passion and energy they bring to every store distribution center and home office has made a tangible difference in our results and so proud of the progress we have made in such a condensed time frame with a limited amount of resources, and we believe we are just getting started with a merchandise and marketing strategy that is generating positive momentum with our customers and a nimble operations team in place to continue driving efficiencies and profitability.
We believe we are well positioned for this year and beyond. We remain committed to unlocking the true potential of Kirkland's home and delivering long-term value to our stakeholders. We appreciate your continued support and commitment as we navigate our repositioning and we look forward to exceeding your expectations.
With that.
Now I'd like to turn the call over to Mike, who will provide detailed commentary on our financial performance and outlook. I'll be back at the end of the call to answer any questions you may have or Mike, over to you.

Thank you, Amy, and good morning, everyone. For the fourth quarter, net sales were $165.9 million compared to $162.5 million in the prior year quarter. As the fourth quarter of fiscal 2023 included 14 weeks as compared to 13 weeks in the fourth quarter of last year. The extra week of sales this year amounted to approximately $6.6 million comparable sales using a 13-week comparison increased 1.7% for the quarter.
The average store count was down 5% compared to the prior quarter. The increase in comparable sales was driven by an increase in store traffic and omnichannel conversion, partially offset by a decline in the average ticket in both channels.
Breaking down sales within the quarter, comps were up 1% in November, up 5% in December and down 4% in January. January business was hampered by winter weather, which disproportionately affected our store foot footprint.
Store sales drove the overall comparable sales increase for the quarter posting an increase of 5%, while e-commerce was down 8%. E-commerce accounted for 23% of total sales in the quarter, down from 26% in the prior year quarter.
From a merchandise perspective, decorative accessories, seasonal gift and Lance, all had strong increases versus the prior year as we as we repurposed our assortment to emphasize faster-turning lower price point options declines in the wall categories, furniture and housewares, partially offset the gains.
Sales performance was relatively consistent across geographic regions with particularly strong results in Florida. Gross profit margin increased 720-basis points to 32% of sales compared to 24.8% in the prior year quarter five components of this year-over-year change were as follows.
First, merchandise margin increased 410-basis points, 54% versus 49.9% in the prior year quarter. Improved sell-through of our seasonal inventory assortment, combined with lower freight rates and a reduction in clearance activity drove the increase in merchandise margin.
Second, central distribution costs decreased by 160-basis points to 4.7% of sales compared to 6.3% of sales in the prior year quarter. Increased efficiency and a smoother inventory flow led to lower labor and operational costs within our distribution centers.
Third, outbound freight costs, including both store and e-commerce shipping expenses, decreased 130-basis points to 7% as a percentage of sales compared to the prior year quarter. The comparison reflects a reduction in shipments to the stores in the current year, resulting from lower inventory levels and a reduction in rates on parcel deliveries for store occupancy costs increased 20-basis points to 9.2%. The increase as a percentage of sales is primarily due to increases in the average store rent being slightly more than the comparable sales increase. And lastly, depreciation included in cost of sales decreased by 40-basis points to 1.1%.
Total operating expenses decreased by $1.1 million to $42.4 million, our 25.5% of sales compared to $43.5 million or 26.8% of sales in the prior year quarter. The decrease in dollars was primarily the result of lower impairment charges of $1.3 million and year-over-year reductions in advertising, e-commerce and corporate salaries.
These declines were largely offset by the effect of an extra week in the calendar, which accounted for approximately $2.4 million and extra operating expenses in the current year. Adjusted EBITDA, excluding impairment, stock compensation and other minor expenses, was $14.2 million versus $2.6 million in the prior year quarter. This is primarily the result of positive comparable store sales and significant gross margin improvement, along with continued tight expense control.
Operating income was $10.7 million or 6.4% of sales as compared to an operating loss of $3.2 million or 2% of sales. Net other expense, which is largely comprised of interest expense, offset by other income was $749,000 for the quarter compared to $409,000 in the prior quarter. Included in these amounts, net interest expense was $902,000 for the quarter compared to $509,000 in the prior year quarter due to higher borrowing levels and higher interest rates.
Our income tax for our income tax rate for the quarter was a benefit of 2% of pretax income compared to an expense of 5.2% of pretax loss in the prior year period.
From a balance sheet perspective, our inventory levels continue to be under control and in line with our planned inventory flow. We ended the quarter with $74.1 million in inventory, a 12% decrease from $84.1 million at the end of the prior year. We had borrowings outstanding at $34 million at year end compared to $15 million at the end of the prior year.
The increase in borrowings reflects the negative operating performance for fiscal 2023 capital expenditures of $4.8 million and $1.2 million in refinancing costs associated with our credit facility amendment in March of 2023 and the closing of our additional credit facility in January of 2024.
As we enter the new fiscal year, we are continuing our policy of not providing specific guidance given the difficulty in forecasting visibility around the macro-economic environment and its impact on our traffic and conversion. However, we do want to provide some color around our expectations in key areas. Early in the first quarter, we have seen continued strength from our brick and mortar stores through positive foot traffic and an improved conversion rate, partially offset by a decline in our average ticket.
Demand on the e-commerce side has been down owing to weaker traffic and conversion trends, along with a lower average order value. February set comp sales results were slightly positive with a strong gross profit improvement and continued expense control.
March is off to a softer start from a sales perspective, but we expect some recovery to occur as we close the month with an early Easter this year for the balance of the year we expect improvement in sales as we build towards the holiday season, coupled with continued merchandise margin improvement driven by our assortment shift to faster-turning categories and our aggressive focus on promotional effectiveness and inventory clearance to ensure freshness throughout the year.
Supply chain costs are declining as we improve labor and transportation efficiency, and we are managing operating expenses very tightly and reducing costs across the business with a favorable macro-economic backdrop. The combinations of these factors provide us with a path to positive adjusted EBITDA in 2024 after two years of losses Looking beyond this year, our goal is to get back to a mid to high single digit adjusted EBITDA margin.
As Amy outlined, we are beginning to see improvements in sales and merchandise margin through our pricing and promotional strategy. Our long-term sales goals are to return store profitability or productivity to historical levels of $1.4 million through merchandising and marketing initiatives and enhance our e-commerce technology to allow unlock the full potential of that channel.
On the cost side, we have already taken steps to improve supply chain efficiencies and remove fixed costs from our distribution facilities. We are addressing additional ways to streamline our operating cost structure. Significant reductions have been achieved over the last several years, but we believe there are additional areas to address and redeploy in the coming quarters. We will provide updates on our progress in each one of these areas.
And lastly, I'd like to reiterate our priorities for capital allocation our number one priority for the business right now is returning to positive cash flow as we make progress toward that end, we continued to focus on reducing borrowings and reestablishing a level of liquidity that allows us to operate the business with more flexibility. The expanded credit facility we closed in January was crucial in providing additional capacity as we execute our strategy as we do so we are also focused on reinvesting in the business, e-commerce technology enhancements and targeted store openings and relocations are the priorities for the near term as we continue to execute our repositioning.
That concludes our prepared remarks. Danielle are now ready for some Q&A.

Question and Answer Session

Operator

Thank you, sir. We will now begin the question and answer session. (Operator Instructions)
Jeremy Hamblin, Craig-Hallum.

Jeremy Hamblin

Thanks and congrats on the strong results and momentum in the business. I wanted to come back to the commentary around near term our results. So it sounds like, you know, slightly positive comps in February you noted that March was a bit softer, which I'm assuming means maybe flat or slightly down year-over-year.
Can you just remind us on when we look at the comparisons that you have year over year, how April shaped up? And then have a follow-on. You noted that you expect some nice improvement on gross margin and in Q1 I wanted to see if you could give us a sense of the magnitude on that you might be expecting that.

Yes, Jeremy, let me get a little contact, Dan, on sort of March, April. And then Mike can give you some specifics. And just as a reminder for this period that we're in right now, we're lapping pretty high furniture sales and specifically in March, we had a really robust all furniture event last year in 2023.
So I think some of our softness year over year is really in still that consistent sort of pressure to the decline in that furniture category. We're still seeing positive momentum in the go forward categories of growth for us and but lapping some of that higher AUR pressure that we're up against last year, I think is really a big part of March as well as the calendar shifts that we're in this year. And we really, as Mike said, I expect that to come back around as we get closer to Easter, which is a key period for us. And then I'll let Mike comment on.

And just to add to that. I think if you look at the comps like you're asking, Jeremy, and I think it's a little difficult because of the calendar shifts. You have a not only a calendar shift with Easter. You've got a retail calendar shift that we're dealing with and have been talking about on paper.
Actually, April was the stronger month last year in the first quarter. But just looking at our promotional calendar and what we have planned, I wouldn't lay too much into that in terms of evaluating as we progress what we're up against just because the calendar is quite different. So I'll just make that point.
And then on your question about the margin, we continue to see positive trends in each component of the margin, which is encouraging. We're doing a lot of work on the merchandise margin. Amy went through a lot of that in her remarks. That's a key component to driving continued merchandise margin improvement for the rest of the year.
But if you kind of dig in on that, that's our merchandise margin improvement and we expect that to continue and this year, but also on the supply chain side, which is included in our gross profit margin. We've eliminated a lot of fixed costs closing two hubs last year, closing a lot of off sites we've revised our parcel contract. So that's helping us on the e-commerce side.
And we're doing a really good job of managing routes to our stores and kind of cutting them back where we needed to reduce the costs there and our labor efficiencies getting better along with lower inventory levels. We expect all of that to really be in play for the for the year. So I think last year we had a gross profit margin of [26.7%] on we've got ample improvement in our ability to improve on that for Q1. I don't think it will be to the level of Q4 just because of it the amount of sales that flow through during that timeframe. But I do expect that we'll see significant improvement.
That's great.

Jeremy Hamblin

And let me just transition here on to the comments around your e-commerce platform, which it sounds like you don't great improvement on store traffic and e-commerce is struggling a bit more. And I wanted to get into a little bit more detail about the relaunch our plan for 2025. So is the relaunch around e-com more just about fitting the assortment on to better meet the needs of what the online shopper is.
And is that when you talk about our relaunch of that platform is would it be what portion of the assortment might be different for your e-commerce channel as opposed to what our customers are going to see in stores? And then secondly, do you have from like a technology investments and needed to do that relaunch. Can you can you talk about anything that you think you might need help support that as you move forward, sir?

So at sort of the highest level we need to go through and really define the channel strategy for e-commerce. I made a comment in my remarks that e-commerce historically at Kirkland's has been more of just an extension of the brick and mortar strategy. And we recognize that the customer shopping behavior is different online. And as I shared those higher ticket categories like furniture and wall decor have historically been a much more significant part of that business.
And that predates even our prior strategy. It's always been a little heavier in those categories and so I think we've got to do a better job at ensuring that we are adequately supporting the assortment mix needs and some of the planning and allocation health checks that we're doing right now is going to help give our merchant team better visibility to demand forecasting online and how that differs from store.
So it certainly starts with having some adjustments to the assortment strategy to ensure that we're giving that online customer, what she needs in terms of how it would compare to a brick and mortar assortment. We definitely want the overall brand experience, aesthetic design to still be very much one brand, but we believe there's opportunity online, obviously to have some whitespace opportunities test into some new businesses and in the future. Our drop-ship business is a good place to do that. And so that's really sort of the assortment mix part of it.
And then on the technology side, our current platform is 12 years old. And so most folks, you know, go and upgrade technology every four or five years. And so we are we are really at that point where we're behind the game, in my opinion on really the baseline expectations of what our current customer experience should be online. We have a little more significant depth and conversion. We have some issues on our cart abandonment that continue to hinder us.
And so it's time and probably past due time for us to make an investment in a more modernized technology to support our future business. The good news on that, and I won't get into too many specifics unless Mike wants to add some color on it is the cost of maintaining a 12-year old platform is very expensive.
So as we move forward, where we haven't fully identified which partner we're going to go with, but we're getting near that decision and it will actually be beyond the implementation year, we would see flat to slightly slight savings on a new platform because of how much it's requiring us to sort of Band-Aid our existing ones together.
So implementation, obviously would be a little bit of a capital outlay and make sure that we're protecting that on our capital budget for whenever that kicks off, whether it's the end of this year, early next year. But it's definitely something that I think will not only improve conversion and ultimately sales, but also will give us probably an expense savings for several years to come just based on being able to walk away from some of these older expenses and these contracts that we have of people helping us manage a really dated website.

Jeremy Hamblin

Got it.
Helpful color.
And then just the last two for me and I'll hop out of the queue. What is your CapEx expectation for 2024? And then on the balance sheet side, you know what, Mike do you think would be kind of the peak on need based on your current outlook in terms of what you might draw down on your credit facility?

Yes. So looking at the CapEx on last year, I think we're 4.7 times or so 4.8 times. I think it will be a little bit less than that this year. And we've got some projects that we are doing, but it's very much a maintenance CapEx budget year. So I expect that will be some could be $3 million, $4 million range. I mentioned we're trying to be and play a little offense. I mean, we talked about the e-commerce platform.
We also talked about some real estate. I mean we're trying to it won't be a big program, but we're at least going through an evaluation to really target where we might be able to fill out some markets or enter some new tried-and-true areas that we know will really work for us.
So we're trying to hold back some capability that on the balance sheet side, obviously, our seasonality dictates how borrowings occur in our inventory flow, and we expect a normal buildup in inventory. I think we will peak out higher than last year on the borrowing simply because we're starting higher we do have more capacity and that capacity expands as we get deeper into the season. But on how much and the timing will really have a lot to do with that but it's going to be more than last year, but we do have additional capacity to cover that this year.

Jeremy Hamblin

Got it.
Thanks so much and good luck this year.

Thanks, Jeremy.

It's Jeremy.

Operator

John Lawrence, The Benchmark Company.

John Lawrence

Great, thanks and congrats, guys. On a great fourth quarter.
Can you, Amy, can you talk a little bit about when you went into holiday and just looking at the whiteboard across the categories, what would you say you give the grades to what you expected to be really good and how it turned out from sort of the planning and allocation standpoint and presentation and maybe what surprised you or what disappointed you In short, sir,

I would say obviously, just from a volume perspective and another win for this category is that holiday continues, as we all know, to be really a hero category for this brand. And so we have a really strong result. I think the merchants have that team did a really great job of rightsizing the value and buying into depth of key items on we had a handful of items in our floral category on that really had a viral reaction out in the consumer marketplace. So that was a huge win for us.
And strategically, we reimplemented the gift category, which you've been with us long enough to know that has historically been a really strong part of the business faster, turning really high margins. And we were very pleased I'm not shocked because I think we all had really high expectations of the category, but it did exceptionally well.
And to the point of there were weeks in the peak holiday season where one individual guest item was the top item in the company. And so we really feel good about the fact that we have gotten back into that business.
And we're going to maximize that all four quarters of the year, even if you think about the first half of the year, we have a Mother's Day period that we think we really walked away from over recent years, and that could give us some real upside in the first half of the year, largely driven by that gift assortment.
And then I would say my biggest surprise probably is just the ongoing turnaround of that decorative accessories category. And if you look back at sort of historical years at Kirkland's, that has been a category that's really been a driver in the front half of the year and tends to fall off a little bit in holiday because of holiday decorating.
But as I shared in my commentary, it had just immense growth and continues to be a really strong driver for us.
And then I guess I would say in terms of sort of disappointment than obviously the furniture and wall categories continue to turn a little slower than we would like them to categories that we are down-trending as well. So nothing that I don't think we can't manage through on that. We were very pleased that between the in-store traffic, the improvements in conversion that we were able to overcome those that process and in Q4 with the categories that really drove fast-turning sales.

John Lawrence

Great, thanks. And just to go through January a little bit, obviously cost your point point-and-a-half on I assume that stores here in the mid-South were US and closed several days. Our real impact us and not only customers couldn't get to the store, but I need to have good employees, correct?

Yes, John, that was Truman. I think we just the way the way our store footprint is laid out. We took the brunt of that. So it was about $2 million. We mentioned that and Andy's remarks about would have been a little bit closer to three on the comp had had it been kind of a normal month. I mean, we know whether gives and takes, and we'll be up against this next year. Hopefully, that will help January and data at the end of this fiscal year.

John Lawrence

But yes, so last question for me is when you look at the store fleet in all the 9 or 10 stores you closed during the quarter as you look at that and Amy, as you as when you it took the top spot and you looked across the fleet of stores other some of those I assume with these changes over the last six months, an improvement there, some of those stores are staying open that would have been closed. Is that fair?

Certainly, I mean, we've seen an improvement definitely in some of our former top volume stores have sort of returned to their top spot, and that's really also kind of driving force behind that wish list of stores that we're targeting for potential new openings to if you go back and look at the store closures over the past, you know, three to four years that Kirkland's on an old strategy, it made sense at the time perhaps to close some of those stores because of the market they were and but as we reposition and we were able to use some customer data to sort of overlay on our old real estate map and our new real estate map and some very obvious opportunities where there's a dense population of our current core customer or we could go back into those and really stimulate sales. So on both then seeing some positivity in our sort of historic real estate strategy really resonating with the changes that we've made.

John Lawrence

Great. And just the idea that can you give us a sense of how many stores are close to that 1.2, 1.4 and gaining on those numbers as we speak. And I know there's work to be done there, but a sense of some of those have got to be approaching those numbers?

Yes. I mean, that's an average sell it. We're currently at like a one between a million, a million -- , say, and I'm really talking about stores. We're not allocating any e-com necessarily to that other than focus on. So but I think to Amy's point what we've seen, I think the takeaway for now on the what the merchandise strategy and how that is feeding into our stores. What we're seeing is some of the historical strong market areas that we've been in are picking up faster than maybe some of the more recent ones that we did in say the last five years or so.
So I think that speaks to an our customer base that knows us that has been with us over these years and is seeing the changes that we've implemented over the last 12 months starting to show up in, and that's drawn around. And I think that's part of the traffic increase we're seeing in the stores right now. So more to come on that.
But I think that's why we think if we look at like we have built a wish list and we don't know how many opportunities really present themselves so quickly, but we want to be there and ready to go because we feel strongly that if we fill back into some of these areas, we'll be successful.

Operator

At this time, this completes our question and answer session and concludes today's teleconference. Thank you for your participation. You may now disconnect your lines.