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Kirkland (KIRK) Up 1.9% Since Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Kirkland's, Inc. (KIRK - Free Report) . Shares have added about 1.9% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Kirkland's posted weaker-than-expected results in the first quarter of fiscal 2017 and posted a negative surprise of 125% in the first quarter, after delivering positive earnings surprises of 50% and 12.5% in third and fourth quarters of fiscal 2016, respectively.
The company reported adjusted loss of $0.09 per share that was wider than the Zacks Consensus Estimate of a loss of $0.04 per share. The reported figure was also down from adjusted earnings of $0.06 per share in the prior-year quarter. We note that the quarter was impacted by the higher cost of sales and operating expenses coupled with lower comparable store sales (comps).
Quarter in Detail
Kirkland's recorded net sales of $132.8 million that grew 2.3% year over year, due to increase in the number of store count. However, it marginally lagged the Zacks Consensus Estimate of $133.9 million. In fact, the company’s sales have missed the Zacks Consensus Estimate in four of the past seven quarters that includes the reported quarter and met the same in the remaining three. Further, e-Commerce revenues surged 32% year over year and contributed $13 million to total sales in the quarter.
Including online sales, comps declined 3.8% versus 0.5% rise registered in the prior-year period. Kirkland’s has been witnessing low traffic over the past few months. Moreover, a tough retail environment is also hurting the company’s sales.
Gross profit fell 3.8% to $47.6 million in the quarter due to higher cost of sales. Also, the company recorded operating loss of $2.3 million compared to operating income of $1.5 million in the prior-year quarter. Further, Kirkland’s has been incurring higher operating expenses due to increase in store occupancy costs. The higher costs resulted from increased shipping and packaging expenses that have pressurized margins in the past few quarters.
Store Update
The company introduced eight stores while shuttered 11 stores in the quarter, taking the total store count to 401 at the end of the quarter. Moving ahead, management expects to open more stores in the fiscal second and third quarters, while store closures will happen in the first half of the year. The company intends to inaugurate 25 to 30 new stores and intends to close 20 stores in fiscal 2017. Additionally, it targets to achieve 2–3% square footage during the year.
Other Financial Details
Kirkland's exited the quarter with cash and cash equivalents of $59.8 million compared with $63.9 million in the previous quarter. Deferred rent and other long-term liabilities were $62.4 million compared with $61.4 million in the previous quarter. Further, net shareholders' equity as of Apr 29, came in at $133.3 million versus $133.8 million as of Jan 28.
Fiscal 2017 Guidance
Kirkland’s reiterated its fiscal 2017 earnings outlook (issued on Mar 10) and continues to expect the same in the band of $0.50–$0.65 per share. The guidance is lower than the year-ago earnings per share of $0.68 per share. Moreover, the company expects earnings to be lower in the first half of the fiscal year.
Further, management predicts sales to increase 6–8% over 2016 sales. In fact, the guidance reflects the additional week in the retail calendar for the full year. This sales guidance assumes comps in the band of slightly negative to slightly positive excluding the effect of the additional week of sales. The company expects to incur capital expenditures between $23 and $27 million in fiscal 2017, versus $32 million incurred in fiscal 2016. This is expected to be backed by store openings along with continued investments in omni-channels.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. There have been two revisions lower for the current quarter.
At this time, Kirkland's stock has a nice Growth Score of 'B', though it is lagging a lot on the momentum front with a 'D'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'A'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than growth investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. It's no surprise that the stock has a Zacks Rank #4 (Sell). We are expecting a below average return from the stock in the next few months.
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Kirkland (KIRK) Up 1.9% Since Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Kirkland's, Inc. (KIRK - Free Report) . Shares have added about 1.9% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Kirkland's Q1 Earnings & Sales Miss, FY17 View Intact
Kirkland's posted weaker-than-expected results in the first quarter of fiscal 2017 and posted a negative surprise of 125% in the first quarter, after delivering positive earnings surprises of 50% and 12.5% in third and fourth quarters of fiscal 2016, respectively.
The company reported adjusted loss of $0.09 per share that was wider than the Zacks Consensus Estimate of a loss of $0.04 per share. The reported figure was also down from adjusted earnings of $0.06 per share in the prior-year quarter. We note that the quarter was impacted by the higher cost of sales and operating expenses coupled with lower comparable store sales (comps).
Quarter in Detail
Kirkland's recorded net sales of $132.8 million that grew 2.3% year over year, due to increase in the number of store count. However, it marginally lagged the Zacks Consensus Estimate of $133.9 million. In fact, the company’s sales have missed the Zacks Consensus Estimate in four of the past seven quarters that includes the reported quarter and met the same in the remaining three. Further, e-Commerce revenues surged 32% year over year and contributed $13 million to total sales in the quarter.
Including online sales, comps declined 3.8% versus 0.5% rise registered in the prior-year period. Kirkland’s has been witnessing low traffic over the past few months. Moreover, a tough retail environment is also hurting the company’s sales.
Gross profit fell 3.8% to $47.6 million in the quarter due to higher cost of sales. Also, the company recorded operating loss of $2.3 million compared to operating income of $1.5 million in the prior-year quarter. Further, Kirkland’s has been incurring higher operating expenses due to increase in store occupancy costs. The higher costs resulted from increased shipping and packaging expenses that have pressurized margins in the past few quarters.
Store Update
The company introduced eight stores while shuttered 11 stores in the quarter, taking the total store count to 401 at the end of the quarter. Moving ahead, management expects to open more stores in the fiscal second and third quarters, while store closures will happen in the first half of the year. The company intends to inaugurate 25 to 30 new stores and intends to close 20 stores in fiscal 2017. Additionally, it targets to achieve 2–3% square footage during the year.
Other Financial Details
Kirkland's exited the quarter with cash and cash equivalents of $59.8 million compared with $63.9 million in the previous quarter. Deferred rent and other long-term liabilities were $62.4 million compared with $61.4 million in the previous quarter. Further, net shareholders' equity as of Apr 29, came in at $133.3 million versus $133.8 million as of Jan 28.
Fiscal 2017 Guidance
Kirkland’s reiterated its fiscal 2017 earnings outlook (issued on Mar 10) and continues to expect the same in the band of $0.50–$0.65 per share. The guidance is lower than the year-ago earnings per share of $0.68 per share. Moreover, the company expects earnings to be lower in the first half of the fiscal year.
Further, management predicts sales to increase 6–8% over 2016 sales. In fact, the guidance reflects the additional week in the retail calendar for the full year. This sales guidance assumes comps in the band of slightly negative to slightly positive excluding the effect of the additional week of sales. The company expects to incur capital expenditures between $23 and $27 million in fiscal 2017, versus $32 million incurred in fiscal 2016. This is expected to be backed by store openings along with continued investments in omni-channels.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. There have been two revisions lower for the current quarter.
Kirkland's, Inc. Price and Consensus
Kirkland's, Inc. Price and Consensus | Kirkland's, Inc. Quote
VGM Scores
At this time, Kirkland's stock has a nice Growth Score of 'B', though it is lagging a lot on the momentum front with a 'D'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'A'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than growth investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. It's no surprise that the stock has a Zacks Rank #4 (Sell). We are expecting a below average return from the stock in the next few months.