x | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
¨ | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Tennessee | 62-1287151 |
(State or other jurisdiction of | (IRS Employer Identification No.) |
incorporation or organization) | |
5310 Maryland Way | |
Brentwood, Tennessee | 37027 |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer | ¨ | Accelerated filer | x | ||
Non-accelerated filer | ¨ | Smaller reporting company | x | ||
Emerging growth company | ¨ |
Page | ||
November 3, | February 3, | October 28, | |||||||||
2018 | 2018 | 2017 | |||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 23,837 | $ | 80,156 | $ | 27,885 | |||||
Inventories, net (1) | 113,759 | 81,255 | 104,741 | ||||||||
Prepaid expenses and other current assets (1) | 23,314 | 15,988 | 25,644 | ||||||||
Total current assets | 160,910 | 177,399 | 158,270 | ||||||||
Property and equipment: | |||||||||||
Equipment | 21,878 | 20,835 | 20,618 | ||||||||
Furniture and fixtures | 82,361 | 80,299 | 79,481 | ||||||||
Leasehold improvements | 126,843 | 119,272 | 116,251 | ||||||||
Computer software and hardware | 67,911 | 59,331 | 57,683 | ||||||||
Projects in progress | 8,899 | 7,685 | 9,046 | ||||||||
Property and equipment, gross | 307,892 | 287,422 | 283,079 | ||||||||
Accumulated depreciation | (192,617 | ) | (174,383 | ) | (167,952 | ) | |||||
Property and equipment, net | 115,275 | 113,039 | 115,127 | ||||||||
Deferred income taxes | 1,255 | 2,216 | 968 | ||||||||
Other assets | 7,201 | 6,543 | 6,552 | ||||||||
Total assets | $ | 284,641 | $ | 299,197 | $ | 280,917 | |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | 55,001 | $ | 45,602 | $ | 44,030 | |||||
Accounts payable to related party vendor | 11,261 | 7,523 | 7,671 | ||||||||
Income taxes payable | — | 4,943 | — | ||||||||
Accrued expenses | 34,466 | 38,872 | 34,699 | ||||||||
Total current liabilities | 100,728 | 96,940 | 86,400 | ||||||||
Deferred rent | 53,944 | 53,303 | 54,196 | ||||||||
Deferred income taxes | 27 | — | 2,561 | ||||||||
Other liabilities | 8,692 | 8,193 | 9,916 | ||||||||
Total liabilities | 163,391 | 158,436 | 153,073 | ||||||||
Shareholders’ equity: | |||||||||||
Preferred stock, no par value, 10,000,000 shares authorized; no shares issued or outstanding at November 3, 2018, February 3, 2018, or October 28, 2017, respectively | — | — | — | ||||||||
Common stock, no par value; 100,000,000 shares authorized; 15,063,439; 15,977,239; and 16,002,387 shares issued and outstanding at November 3, 2018, February 3, 2018, and October 28, 2017, respectively | 168,725 | 167,501 | 167,063 | ||||||||
Accumulated deficit | (47,475 | ) | (26,740 | ) | (39,219 | ) | |||||
Total shareholders’ equity | 121,250 | 140,761 | 127,844 | ||||||||
Total liabilities and shareholders’ equity | $ | 284,641 | $ | 299,197 | $ | 280,917 |
13-Week Period Ended | 39-Week Period Ended | ||||||||||||||
November 3, | October 28, | November 3, | October 28, | ||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net sales | $ | 154,571 | $ | 144,979 | $ | 430,924 | $ | 409,503 | |||||||
Cost of sales (1) | 95,289 | 87,840 | 267,619 | 248,820 | |||||||||||
Cost of sales related to merchandise purchased from related party vendor | 12,629 | 11,668 | 34,542 | 32,278 | |||||||||||
Cost of sales | 107,918 | 99,508 | 302,161 | 281,098 | |||||||||||
Gross profit | 46,653 | 45,471 | 128,763 | 128,405 | |||||||||||
Operating expenses: | |||||||||||||||
Compensation and benefits | 29,621 | 28,072 | 83,490 | 80,556 | |||||||||||
Other operating expenses | 18,783 | 19,427 | 54,067 | 54,501 | |||||||||||
Depreciation (exclusive of depreciation included in cost of sales) (1) | 1,867 | 1,739 | 5,405 | 5,089 | |||||||||||
Total operating expenses | 50,271 | 49,238 | 142,962 | 140,146 | |||||||||||
Operating loss | (3,618 | ) | (3,767 | ) | (14,199 | ) | (11,741 | ) | |||||||
Interest expense | 69 | 69 | 200 | 195 | |||||||||||
Other income | (224 | ) | (229 | ) | (825 | ) | (448 | ) | |||||||
Loss before income taxes | (3,463 | ) | (3,607 | ) | (13,574 | ) | (11,488 | ) | |||||||
Income tax benefit | (683 | ) | (1,245 | ) | (3,197 | ) | (3,919 | ) | |||||||
Net loss | $ | (2,780 | ) | $ | (2,362 | ) | $ | (10,377 | ) | $ | (7,569 | ) | |||
Loss per share: | |||||||||||||||
Basic | $ | (0.18 | ) | $ | (0.15 | ) | $ | (0.66 | ) | $ | (0.48 | ) | |||
Diluted | $ | (0.18 | ) | $ | (0.15 | ) | $ | (0.66 | ) | $ | (0.48 | ) | |||
Weighted average shares outstanding: | |||||||||||||||
Basic | 15,486 | 16,013 | 15,673 | 15,932 | |||||||||||
Diluted | 15,486 | 16,013 | 15,673 | 15,932 |
Common Stock | Accumulated Deficit | Total Shareholders’ Equity | ||||||||||||
Shares | Amount | |||||||||||||
Balance at February 3, 2018 | 15,977,239 | $ | 167,501 | $ | (26,740 | ) | $ | 140,761 | ||||||
Employee stock purchases | 28,246 | 238 | — | 238 | ||||||||||
Exercise of stock options | 177,526 | 23 | — | 23 | ||||||||||
Restricted stock issued | 108,900 | — | — | — | ||||||||||
Net share settlement of stock options and restricted stock | (146,355 | ) | (378 | ) | — | (378 | ) | |||||||
Stock-based compensation expense | — | 1,341 | — | 1,341 | ||||||||||
Repurchase and retirement of common stock | (1,082,117 | ) | — | (10,358 | ) | (10,358 | ) | |||||||
Net loss | — | — | (10,377 | ) | (10,377 | ) | ||||||||
Balance at November 3, 2018 | 15,063,439 | $ | 168,725 | $ | (47,475 | ) | $ | 121,250 |
39-Week Period Ended | |||||||
November 3, | October 28, | ||||||
2018 | 2017 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (10,377 | ) | $ | (7,569 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
Depreciation of property and equipment | 21,992 | 19,841 | |||||
Amortization of deferred rent | (6,826 | ) | (5,784 | ) | |||
Amortization of debt issue costs | 41 | 40 | |||||
Loss on disposal of property and equipment | 340 | 157 | |||||
Stock-based compensation expense | 1,341 | 1,766 | |||||
Deferred income taxes | 988 | 2,312 | |||||
Changes in assets and liabilities: | |||||||
Inventories, net (1) | (32,504 | ) | (31,550 | ) | |||
Prepaid expenses and other current assets (1) | (2,318 | ) | (2,396 | ) | |||
Other noncurrent assets | (699 | ) | (1,554 | ) | |||
Accounts payable | 9,856 | 10,502 | |||||
Accounts payable to related party vendor | 3,738 | 2,663 | |||||
Income taxes refundable | (9,951 | ) | (13,609 | ) | |||
Accrued expenses and other current and noncurrent liabilities | 3,560 | 12,912 | |||||
Net cash used in operating activities | (20,819 | ) | (12,269 | ) | |||
Cash flows from investing activities: | |||||||
Capital expenditures | (25,025 | ) | (23,617 | ) | |||
Net cash used in investing activities | (25,025 | ) | (23,617 | ) | |||
Cash flows from financing activities: | |||||||
Cash used in net share settlement of stock options and restricted stock | (378 | ) | (201 | ) | |||
Proceeds received from employee stock option exercises | 23 | — | |||||
Employee stock purchases | 238 | 253 | |||||
Repurchase and retirement of common stock | (10,358 | ) | (218 | ) | |||
Net cash used in financing activities | (10,475 | ) | (166 | ) | |||
Cash and cash equivalents: | |||||||
Net decrease | (56,319 | ) | (36,052 | ) | |||
Beginning of the period | 80,156 | 63,937 | |||||
End of the period | $ | 23,837 | $ | 27,885 | |||
Supplemental schedule of non-cash activities: | |||||||
Non-cash accruals for purchases of property and equipment | $ | 1,970 | $ | 1,997 |
13-Week Period Ended | 39-Week Period Ended | |||||||||||
November 3, 2018 | October 28, 2017 | November 3, 2018 | October 28, 2017 | |||||||||
Stock-based compensation expense (included in compensation and benefits on the condensed consolidated statements of operations) | $ | 450 | $ | 582 | $ | 1,341 | $ | 1,766 | ||||
Stock options granted | — | — | 157,700 | 245,000 | ||||||||
Restricted stock units granted | 132,834 | 2,000 | 243,734 | 148,500 |
13-Week Period Ended | 39-Week Period Ended | ||||||||||||||
November 3, 2018 | October 28, 2017 | November 3, 2018 | October 28, 2017 | ||||||||||||
Related Party Vendor: | |||||||||||||||
Purchases | $ | 17,444 | $ | 17,684 | $ | 41,966 | $ | 41,743 | |||||||
Purchases as a percent of total merchandise purchases | 22.5 | % | 20.4 | % | 21.1 | % | 21.5 | % |
13-Week Period Ended | 39-Week Period Ended | ||||||||||||||
November 3, 2018 | October 28, 2017 | November 3, 2018 | October 28, 2017 | ||||||||||||
Shares repurchased and retired | 689,473 | 18,901 | 1,082,117 | 18,901 | |||||||||||
Share repurchase cost | $ | 6,554 | $ | 218 | $ | 10,358 | $ | 218 |
13-Week Period Ended | 39-Week Period Ended | ||||||||||
November 3, 2018 | October 28, 2017 | November 3, 2018 | October 28, 2017 | ||||||||
New stores opened during the period | 6 | 10 | 22 | 26 | |||||||
Stores closed during the period | — | 1 | 8 | 15 |
November 3, 2018 | October 28, 2017 | ||||
Number of stores | 432 | 415 | |||
Square footage | 3,420,097 | 3,275,638 | |||
Average square footage per store | 7,917 | 7,893 |
13-Week Period Ended | ||||||||||||||||||||
November 3, 2018 | October 28, 2017 | Change | ||||||||||||||||||
$ | % | $ | % | $ | % | |||||||||||||||
Net sales | $ | 154,571 | 100.0 | % | $ | 144,979 | 100.0 | % | $ | 9,592 | 6.6 | % | ||||||||
Cost of sales | 107,918 | 69.8 | 99,508 | 68.6 | 8,410 | 8.5 | ||||||||||||||
Gross profit | 46,653 | 30.2 | 45,471 | 31.4 | 1,182 | 2.6 | ||||||||||||||
Operating expenses: | ||||||||||||||||||||
Compensation and benefits | 29,621 | 19.2 | 28,072 | 19.4 | 1,549 | 5.5 | ||||||||||||||
Other operating expenses | 18,783 | 12.1 | 19,427 | 13.4 | (644 | ) | (3.3 | ) | ||||||||||||
Depreciation (exclusive of depreciation included in cost of sales) | 1,867 | 1.2 | 1,739 | 1.2 | 128 | 7.4 | ||||||||||||||
Total operating expenses | 50,271 | 32.5 | 49,238 | 34.0 | 1,033 | 2.1 | ||||||||||||||
Operating loss | (3,618 | ) | (2.3 | ) | (3,767 | ) | (2.6 | ) | 149 | (4.0 | ) | |||||||||
Interest expense | 69 | — | 69 | — | — | — | ||||||||||||||
Other income | (224 | ) | (0.1 | ) | (229 | ) | (0.1 | ) | 5 | (2.2 | ) | |||||||||
Loss before income taxes | (3,463 | ) | (2.2 | ) | (3,607 | ) | (2.5 | ) | 144 | (4.0 | ) | |||||||||
Income tax benefit | (683 | ) | (0.4 | ) | (1,245 | ) | (0.9 | ) | 562 | (45.1 | ) | |||||||||
Net loss | $ | (2,780 | ) | (1.8 | )% | $ | (2,362 | ) | (1.6 | )% | $ | (418 | ) | 17.7 | % |
39-Week Period Ended | ||||||||||||||||||||
November 3, 2018 | October 28, 2017 | Change | ||||||||||||||||||
$ | % | $ | % | $ | % | |||||||||||||||
Net sales | $ | 430,924 | 100.0 | % | $ | 409,503 | 100.0 | % | $ | 21,421 | 5.2 | % | ||||||||
Cost of sales | 302,161 | 70.1 | 281,098 | 68.6 | 21,063 | 7.5 | ||||||||||||||
Gross profit | 128,763 | 29.9 | 128,405 | 31.4 | 358 | 0.3 | ||||||||||||||
Operating expenses: | ||||||||||||||||||||
Compensation and benefits | 83,490 | 19.4 | 80,556 | 19.7 | 2,934 | 3.6 | ||||||||||||||
Other operating expenses | 54,067 | 12.5 | 54,501 | 13.3 | (434 | ) | (0.8 | ) | ||||||||||||
Depreciation (exclusive of depreciation included in cost of sales) | 5,405 | 1.3 | 5,089 | 1.3 | 316 | 6.2 | ||||||||||||||
Total operating expenses | 142,962 | 33.2 | 140,146 | 34.3 | 2,816 | 2.0 | ||||||||||||||
Operating loss | (14,199 | ) | (3.3 | ) | (11,741 | ) | (2.9 | ) | (2,458 | ) | 20.9 | |||||||||
Interest expense | 200 | — | 195 | — | 5 | 2.6 | ||||||||||||||
Other income | (825 | ) | (0.2 | ) | (448 | ) | (0.1 | ) | (377 | ) | 84.2 | |||||||||
Loss before income taxes | (13,574 | ) | (3.1 | ) | (11,488 | ) | (2.8 | ) | (2,086 | ) | 18.2 | |||||||||
Income tax benefit | (3,197 | ) | (0.7 | ) | (3,919 | ) | (1.0 | ) | 722 | (18.4 | ) | |||||||||
Net loss | $ | (10,377 | ) | (2.4 | )% | $ | (7,569 | ) | (1.8 | )% | $ | (2,808 | ) | 37.1 | % |
13-Week Period Ended | 39-Week Period Ended | ||||||||||||||
November 3, 2018 | October 28, 2017 | November 3, 2018 | October 28, 2017 | ||||||||||||
Shares repurchased and retired | 689,473 | 18,901 | 1,082,117 | 18,901 | |||||||||||
Share repurchase cost | $ | 6,554 | $ | 218 | $ | 10,358 | $ | 218 |
13-Week Period Ended | 39-Week Period Ended | ||||||||||||||
November 3, 2018 | October 28, 2017 | November 3, 2018 | October 28, 2017 | ||||||||||||
Related Party Vendor: | |||||||||||||||
Purchases | $ | 17,444 | $ | 17,684 | $ | 41,966 | $ | 41,743 | |||||||
Purchases as a percent of total merchandise purchases | 22.5 | % | 20.4 | % | 21.1 | % | 21.5 | % | |||||||
Cost of sales | 12,629 | 11,668 | 34,542 | 32,278 | |||||||||||
Payable amounts outstanding at fiscal period-end | 11,261 | 7,671 | 11,261 | 7,671 |
• | If we do not generate sufficient cash flow, we may not be able to implement our growth strategy. |
• | If we are unable to profitably open and operate new stores at a rate that exceeds planned store closings, we may not be able to adequately execute our growth strategy, resulting in a decrease in net sales and net income. |
• | Our success depends upon our marketing, advertising and promotional efforts. If we are unable to implement them successfully, or if our competitors market, advertise or promote more effectively than we do, our revenue may be adversely affected. |
• | We may not be able to successfully anticipate consumer trends, and our failure to do so may lead to loss of consumer acceptance of our products resulting in reduced net sales. |
• | We may not be able to successfully respond to technological change, our website could become obsolete and our financial results and conditions could be adversely affected. |
• | Inventory loss and theft and the inability to anticipate inventory needs may result in reduced net sales. |
• | Inability to successfully develop and maintain a relevant and reliable omni-channel experience for our customers could adversely affect our sales, results of operations and reputation. |
• | Our results could be negatively impacted if our merchandise offering suffers a substantial impediment to its reputation due to real or perceived quality issues. |
• | We face an extremely competitive specialty retail business market, and such competition could result in a reduction of our prices and a loss of our market share. |
• | Weather conditions could adversely affect our sales and/or profitability by affecting consumer shopping patterns. |
• | We are exposed to the risk of natural disasters, pandemic outbreaks, global political events, war and terrorism that could disrupt our business and result in lower sales, increased operating costs and capital expenditures. |
• | Our performance may be affected by general economic conditions. |
• | Our profitability is vulnerable to inflation and cost increases. |
• | Our business is highly seasonal and our fourth quarter contributes a disproportionate amount of our net sales, net income and cash flow, and any factors negatively impacting us during our fourth quarter could reduce our net sales, net income and cash flow, leaving us with excess inventory and making it more difficult for us to finance our capital requirements. |
• | Failure to control merchandise returns could negatively impact the business. |
• | We may experience significant variations in our quarterly results. |
• | Our comparable store net sales fluctuate due to a variety of factors. |
• | Our freight costs and thus our cost of goods sold are impacted by changes in fuel prices. |
• | New legal requirements could adversely affect our operating results. |
• | The Tax Cuts and Jobs Act could have material effects on the Company. |
• | Litigation may adversely affect our business, financial condition, results of operations or liquidity. |
• | Product liability claims could adversely affect our reputation. |
• | If we fail to protect our brand name, competitors may adopt trade names that dilute the value of our brand name. |
• | Failure to protect the integrity and security of individually identifiable data of our customers and employees could expose us to litigation and damage our reputation; the expansion of our e-commerce Business has inherent cybersecurity risks that may result in business disruptions. |
• | Our hardware and software systems are vulnerable to damage that could harm our business. |
• | We depend on a number of vendors to supply our merchandise, and any delay in merchandise deliveries from certain vendors may lead to a decline in inventory which could result in a loss of net sales. |
• | We are dependent on foreign imports for a significant portion of our merchandise, and any changes in the trading relations and conditions between the United States and the relevant foreign countries may lead to a decline in inventory resulting in a decline in net sales, or an increase in the cost of sales resulting in reduced gross profit. |
• | Our success is highly dependent on our planning and control processes and our supply chain, and any disruption in or failure to continue to improve these processes may result in a loss of net sales and net income. |
• | We depend on key personnel, and, if we lose the services of any member of our senior management team and are unable to replace them with qualified individuals on a timely basis, we may not be able to run our business effectively. |
• | Our charter and bylaw provisions and certain provisions of Tennessee law may make it difficult in some respects to cause a change in control of Kirkland’s and replace incumbent management. |
• | If we fail to maintain an effective system of internal control, we may not be able to accurately report our financial results. |
• | The market price for our common stock might be volatile and could result in a decline in the value of your investment. |
Issuer Repurchases of Equity Securities | ||||||||||
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Programs | Maximum Dollar Value of Shares that May Yet be Purchased Under the Programs (in 000s) | ||||||
August 5, 2018 to September 1, 2018 | 58,409 | $ | 9.88 | 58,409 | $ | 5,014 | ||||
September 2, 2018 to October 6, 2018 | 327,582 | 9.44 | 327,582 | 11,921 | ||||||
October 7, 2018 to November 3, 2018 | 303,482 | 9.50 | 303,482 | 9,037 | ||||||
Total | 689,473 | $ | 9.51 | 689,473 | $ | 9,037 |
(a) | Exhibits. |
Exhibit No. | Description of Document | |
101 | Interactive Data File (Quarterly Report on Form 10-Q, for the quarter ended November 3, 2018, furnished in XBRL (eXtensible Business Reporting Language)) |
KIRKLAND’S, INC. | |
Date: December 6, 2018 | /s/ Steve C. Woodward |
Steve C. Woodward Chief Executive Officer | |
Date: December 6, 2018 | /s/ Nicole A. Strain |
Nicole A. Strain Interim Chief Financial Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of Kirkland’s, Inc. (“registrant”); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(a) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: December 6, 2018 | /s/ Steve C. Woodward |
Steve C. Woodward | |
Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of Kirkland’s, Inc. (“registrant”); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(a) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: December 6, 2018 | /s/ Nicole A. Strain |
Nicole A. Strain | |
Interim Chief Financial Officer |
/s/ Steve C. Woodward |
Chief Executive Officer |
December 6, 2018 |
/s/ Nicole A. Strain |
Interim Chief Financial Officer |
December 6, 2018 |
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Nov. 03, 2018 |
Nov. 27, 2018 |
|
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Nov. 03, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q3 | |
Trading Symbol | KIRK | |
Entity Registrant Name | KIRKLAND'S, INC | |
Entity Central Index Key | 0001056285 | |
Current Fiscal Year End Date | --02-02 | |
Entity Filer Category | Accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Common Stock, Shares Outstanding | 14,858,235 |
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares |
Nov. 03, 2018 |
Feb. 03, 2018 |
Oct. 28, 2017 |
---|---|---|---|
Statement of Financial Position [Abstract] | |||
Preferred stock, par value (usd per share) | $ 0 | $ 0 | $ 0 |
Preferred stock, shares authorized (in shares) | 10,000,000 | 10,000,000 | 10,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 | 0 |
Common stock, par value (usd per share) | $ 0 | $ 0 | $ 0 |
Common stock, shares authorized (in shares) | 100,000,000 | 100,000,000 | 100,000,000 |
Common stock, shares issued (in shares) | 15,063,439 | 15,977,239 | 16,002,387 |
Common stock, shares outstanding (in shares) | 15,063,439 | 15,977,239 | 16,002,387 |
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
Nov. 03, 2018 |
Oct. 28, 2017 |
Nov. 03, 2018 |
Oct. 28, 2017 |
|||||
Income Statement [Abstract] | ||||||||
Net sales | $ 154,571 | $ 144,979 | $ 430,924 | $ 409,503 | ||||
Cost of sales (1) | 95,289 | 87,840 | [1] | 267,619 | 248,820 | [1] | ||
Cost of sales related to merchandise purchased from related party vendor | 12,629 | 11,668 | 34,542 | 32,278 | ||||
Cost of sales | 107,918 | 99,508 | 302,161 | 281,098 | ||||
Gross profit | 46,653 | 45,471 | 128,763 | 128,405 | ||||
Operating expenses: | ||||||||
Compensation and benefits | 29,621 | 28,072 | 83,490 | 80,556 | ||||
Other operating expenses | 18,783 | 19,427 | 54,067 | 54,501 | ||||
Depreciation (exclusive of depreciation included in cost of sales) | 1,867 | 1,739 | [1] | 5,405 | 5,089 | [1] | ||
Total operating expenses | 50,271 | 49,238 | 142,962 | 140,146 | ||||
Operating loss | (3,618) | (3,767) | (14,199) | (11,741) | ||||
Interest expense | 69 | 69 | 200 | 195 | ||||
Other income | (224) | (229) | (825) | (448) | ||||
Loss before income taxes | (3,463) | (3,607) | (13,574) | (11,488) | ||||
Income tax benefit | (683) | (1,245) | (3,197) | (3,919) | ||||
Net loss | $ (2,780) | $ (2,362) | $ (10,377) | $ (7,569) | ||||
Loss per share: | ||||||||
Basic (usd per share) | $ (0.18) | $ (0.15) | $ (0.66) | $ (0.48) | ||||
Diluted (usd per share) | $ (0.18) | $ (0.15) | $ (0.66) | $ (0.48) | ||||
Weighted average shares outstanding: | ||||||||
Basic (in shares) | 15,486 | 16,013 | 15,673 | 15,932 | ||||
Diluted (in shares) | 15,486 | 16,013 | 15,673 | 15,932 | ||||
|
Condensed Consolidated Statement of Shareholders' Equity (Unaudited) - 9 months ended Nov. 03, 2018 - USD ($) $ in Thousands |
Total |
Common Stock |
Accumulated Deficit |
---|---|---|---|
Balance, beginning of period at Feb. 03, 2018 | $ 140,761 | $ 167,501 | $ (26,740) |
Balance, beginning of period (in shares) at Feb. 03, 2018 | 15,977,239 | 15,977,239 | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||
Employee stock purchases | $ 238 | $ 238 | |
Employee stock purchases, Shares | 28,246 | ||
Exercise of stock options, Value | 23 | $ 23 | |
Exercise of stock options, Shares | 177,526 | ||
Restricted stock issued, Shares, Gross | 108,900 | ||
Net share settlement of stock options and restricted stock, Value | (378) | $ (378) | |
Net share settlement of stock options and restricted stock, Shares | (146,355) | ||
Stock-based compensation expense | 1,341 | $ 1,341 | |
Repurchase and retirement of common stock, Value | $ (10,358) | (10,358) | |
Repurchase and retirement of common stock, Shares | (1,082,117) | (1,082,117) | |
Net loss | $ (10,377) | (10,377) | |
Balance, end of period at Nov. 03, 2018 | $ 121,250 | $ 168,725 | $ (47,475) |
Balance, end of period (in shares) at Nov. 03, 2018 | 15,063,439 | 15,063,439 |
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands |
9 Months Ended | ||||
---|---|---|---|---|---|
Nov. 03, 2018 |
Oct. 28, 2017 |
||||
Cash flows from operating activities: | |||||
Net loss | $ (10,377) | $ (7,569) | |||
Adjustments to reconcile net loss to net cash used in operating activities: | |||||
Depreciation of property and equipment | 21,992 | 19,841 | |||
Amortization of deferred rent | (6,826) | (5,784) | |||
Amortization of debt issue costs | 41 | 40 | |||
Loss on disposal of property and equipment | 340 | 157 | |||
Stock-based compensation expense | 1,341 | 1,766 | |||
Deferred income taxes | 988 | 2,312 | |||
Changes in assets and liabilities: | |||||
Inventories, net (1) | (32,504) | (31,550) | [1] | ||
Prepaid expenses and other current assets (1) | (2,318) | (2,396) | [1] | ||
Other noncurrent assets | (699) | (1,554) | |||
Accounts payable | 9,856 | 10,502 | |||
Accounts payable to related party vendor | 3,738 | 2,663 | |||
Income taxes refundable | (9,951) | (13,609) | |||
Accrued expenses and other current and noncurrent liabilities | 3,560 | 12,912 | |||
Net cash used in operating activities | (20,819) | (12,269) | |||
Net Cash Provided by (Used in) Investing Activities, Continuing Operations [Abstract] | |||||
Capital expenditures | (25,025) | (23,617) | |||
Net cash used in investing activities | (25,025) | (23,617) | |||
Cash flows from financing activities: | |||||
Cash used in net share settlement of stock options and restricted stock | (378) | (201) | |||
Proceeds received from employee stock option exercises | 23 | 0 | |||
Employee stock purchases | 238 | 253 | |||
Repurchase and retirement of common stock | (10,358) | (218) | |||
Net cash used in financing activities | (10,475) | (166) | |||
Cash and cash equivalents: | |||||
Net decrease | (56,319) | (36,052) | |||
Beginning of the period | 80,156 | 63,937 | |||
End of the period | 23,837 | 27,885 | |||
Supplemental schedule of non-cash activities: | |||||
Non-cash accruals for purchases of property and equipment | $ 1,970 | $ 1,997 | |||
|
Basis of Presentation |
9 Months Ended |
---|---|
Nov. 03, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation Kirkland’s, Inc. (the “Company”) is a specialty retailer of home décor in the United States operating 432 stores in 37 states as of November 3, 2018, as well as an e-commerce enabled website, www.kirklands.com. The condensed consolidated financial statements of the Company include the accounts of Kirkland’s, Inc. and its wholly-owned subsidiaries, Kirkland’s Stores, Inc., Kirkland’s DC, Inc., and Kirkland’s Texas, LLC. Significant intercompany accounts and transactions have been eliminated. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and are presented in accordance with the requirements of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required for complete financial statements. In the opinion of management, all adjustments, including normal recurring accruals, considered necessary for a fair presentation have been included. These financial statements should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 3, 2018. It should be understood that accounting measurements at interim dates inherently involve greater reliance on estimates than those at fiscal year-end. In addition, because of seasonality factors, the results of the Company’s operations for the 13-week and 39-week periods ended November 3, 2018 are not indicative of the results to be expected for any other interim period or for the entire fiscal year. The Company’s fiscal year ends on the Saturday closest to January 31, resulting in years of either 52 or 53 weeks. The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from the estimates and assumptions used. Changes in estimates are recognized in the period when new information becomes available to management. Areas where the nature of the estimate makes it reasonably possible that actual results could materially differ from amounts estimated include, but are not limited to, impairment assessments on long-lived assets, asset retirement obligations, inventory reserves, self-insurance reserves, income tax liabilities, stock-based compensation, employee bonus accruals, gift card breakage and contingent liabilities. In the fourth quarter of fiscal 2017, the Company concluded that it was appropriate to classify supplies inventory in prepaid expenses and other current assets instead of inventories, net, in the consolidated financial statements. The Company reclassified prior period amounts to reflect this change. This resulted in $2.6 million reclassified from inventories, net, to prepaid expenses and other current assets on the condensed consolidated balance sheet as of October 28, 2017, and $0.3 million reclassified from inventories, net, to prepaid expense and other current assets in the changes in assets and liabilities section of the condensed consolidated statements of cash flows for the 39-week period ended October 28, 2017. Also, during the fourth quarter of fiscal 2017, the Company reclassified supply chain and store-related depreciation expense to cost of sales whereas it was previously included in depreciation in its financial statements. The Company also reclassified prior period amounts to reflect this change. This reclassification increased cost of sales by approximately $5.1 million and $14.8 million for the 13-week and 39-week periods ended October 28, 2017, respectively, with an equal and offsetting decrease to depreciation. This reclassification had no impact on net sales, operating loss, net loss or loss per share. For the 13-week and 39-week periods ended November 3, 2018, the Company recorded an unfavorable $0.7 million one-time out-of-period adjustment related to revised straight-line rent calculations to cost of sales from deferred rent. For the 39-week period ended October 28, 2017, the Company recorded a favorable $1.2 million one-time out-of-period adjustment of ancillary rent payments to prepaid expenses and other current assets from cost of sales. |
Income Taxes |
9 Months Ended |
---|---|
Nov. 03, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes An estimate of the annual effective tax rate is used at each interim period based on the facts and circumstances available at that time, while the actual effective tax rate is calculated at year-end. For the 13-week periods ended November 3, 2018 and October 28, 2017, the Company recorded an income tax benefit of 19.7% and 34.5% of the loss before income taxes, respectively. For the 39-week periods ended November 3, 2018 and October 28, 2017, the Company recorded an income tax benefit of 23.6% and 34.1% of the loss before income taxes, respectively. The decrease in the tax rate for the 13-week and 39-week periods ended November 3, 2018 was primarily due to the effect of the U.S. Tax Cuts and Jobs Act, which reduced the U.S. federal corporate rate from 35% to 21% effective as of January 1, 2018, which was partially offset by additional tax expense related to stock compensation activity. |
Loss Per Share |
9 Months Ended |
---|---|
Nov. 03, 2018 | |
Earnings Per Share [Abstract] | |
Loss Per Share | Loss Per Share Basic loss per share is computed by dividing net loss by the weighted average number of shares outstanding during each period presented. Diluted loss per share is computed by dividing net loss by the weighted average number of shares outstanding plus the dilutive effect of stock equivalents outstanding during the applicable periods using the treasury stock method. Diluted loss per share reflects the potential dilution that could occur if options to purchase stock were exercised into common stock and if outstanding grants of restricted stock were vested. Stock options and restricted stock units that were not included in the computation of diluted loss per share, because to do so would have been antidilutive, were approximately 1.2 million and 1.6 million shares for each of the 13-week periods ended November 3, 2018 and October 28, 2017, respectively, and 1.3 million and 1.5 million shares for each of the 39-week periods ended November 3, 2018 and October 28, 2017, respectively. |
Fair Value of Financial Instruments |
9 Months Ended |
---|---|
Nov. 03, 2018 | |
Fair Value of Financial Instruments [Abstract] | |
Fair Value of Financial Instruments, Policy | Fair Value of Financial Instruments Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants on the measurement date. The Company uses a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The carrying amounts of cash and cash equivalents, accounts receivable, other current assets and accounts payable approximate fair value because of their short maturities. The Company also maintains The Executive Non-Qualified Excess Plan (the “Deferred Compensation Plan”). The Deferred Compensation Plan is funded, and the Company invests participant deferrals into trust assets, which are invested in a variety of mutual funds that are Level 1 inputs. The plan assets and plan liabilities are adjusted to fair value on a recurring basis. Deferred Compensation Plan assets and liabilities were approximately $2.1 million, $2.2 million, and $2.2 million as of November 3, 2018, February 3, 2018, and October 28, 2017, respectively, and were recorded in other assets and other liabilities in the condensed consolidated balance sheets. |
Commitments and Contingencies |
9 Months Ended |
---|---|
Nov. 03, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies The Company was named as a defendant in a putative class action filed in April 2017 in the United States District Court for the Western District of Pennsylvania, Gennock v. Kirkland’s, Inc. The complaint alleges that the Company, in violation of federal law, published more than the last five digits of a credit or debit card number on customers’ receipts. The Company denies the material allegations of the complaint. On January 9, 2018, the District Court denied the Company’s motion to dismiss this matter. On January 31, 2018, the Court granted the Company’s motion to stay the proceedings in its case pending the Third Circuit’s decision in Kamal v. J. Crew Group, Inc., No. 17-2345 (3d. Cir.). The J. Crew case presents the exact same standing issues as the Company’s case, but in J. Crew the defendant was granted its motion to dismiss at the trial court level. On appeal, the Third Circuit heard oral argument in the J. Crew case on February 8, 2018, and a decision is expected this year. The Company continues to believe that the case is without merit and intends to continue to vigorously defend itself against the allegations. The matter is covered by insurance, and the Company does not believe that the case will have a material adverse effect on its consolidated financial condition, operating results or cash flows. The Company has been named as a defendant in a putative class action filed in May 2018 in the Superior Court of California, Miles v. Kirkland’s Stores, Inc. The case has been removed to Federal Court, Central District of California, and trial is not yet set. The complaint alleges, on behalf of Miles and all other hourly Kirkland’s employees in California, various wage and hour violations. Kirkland’s denies the material allegations in the complaint and believes that its employment policies are generally compliant with California law. The parties have tentatively agreed to an early mediation with minimal exchange of discovery. To date, the parties have exchanged the court mandated initial disclosures, and the Court has issued a notice of intent to issue a scheduling order on January 10, 2019. The Company believes the case is without merit and intends to vigorously defend itself against the allegations. The Company is also party to other pending legal proceedings and claims that arise in the normal course of business. Although the outcome of such proceedings and claims cannot be determined with certainty, the Company’s management is of the opinion that it is unlikely that such proceedings and any claims in excess of insurance coverage will have a material effect on the Company’s consolidated financial condition, operating results or cash flows. |
Stock-Based Compensation |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Nov. 03, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | Stock-Based Compensation The Company maintains equity incentive plans under which it may grant non-qualified stock options, incentive stock options, restricted stock, restricted stock units, or stock appreciation rights to employees, non-employee directors and consultants. Compensation expense is recognized on a straight-line basis over the vesting periods of each grant. There have been no material changes in the assumptions used to compute compensation expense during the current quarter. The table below sets forth selected stock-based compensation information (in thousands, except share amounts) for the periods indicated:
|
Related Party Transactions |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Nov. 03, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions | Related Party Transactions The Company has an agreement with a related party vendor to purchase merchandise inventory. The vendor is considered a related party for financial reporting purposes because its principal owner is the spouse of the Company’s Vice President of Merchandising. The table below sets forth selected results related to this vendor in dollars (in thousands) and percentages for the periods indicated:
|
Stock Repurchase Program |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Nov. 03, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Treasury Stock Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Treasury Stock [Text Block] | Stock Repurchase Plan On August 22, 2017, the Company announced that its Board of Directors authorized a stock repurchase plan providing for the purchase in the aggregate of up to $10 million of the Company’s outstanding common stock. This stock repurchase plan was completed during the third quarter of fiscal 2018. On September 24, 2018, the Company announced that its Board of Directors authorized a new stock repurchase plan providing for the purchase in the aggregate of up to $10 million of the Company’s outstanding common stock. Repurchases of shares will be made in accordance with applicable securities laws and may be made from time to time in the open market or by negotiated transactions. The amount and timing of repurchases will be based on a variety of factors, including stock acquisition price, regulatory limitations and other market and economic factors. The stock repurchase plan does not require the Company to repurchase any specific number of shares, and the Company may terminate the repurchase plan at any time. The table below sets forth selected stock repurchase plan information (in thousands, except share amounts) for the periods indicated:
As of November 3, 2018, the Company had approximately $9.0 million remaining under the new stock repurchase plan. |
New Accounting Pronouncements |
9 Months Ended |
---|---|
Nov. 03, 2018 | |
Accounting Changes and Error Corrections [Abstract] | |
New Accounting Pronouncements | New Accounting Pronouncements New Accounting Pronouncements Recently Adopted In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). Under ASU 2014-09, an entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects what it expects in exchange for the goods or services. ASU 2014-09 also requires more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amendments in ASU 2014-09 were effective for the Company at the beginning of its fiscal 2018 year. Companies that transitioned to this new standard could either retrospectively restate each prior reporting period or reflect the cumulative effect of initially applying the updates with an adjustment to retained earnings at the date of adoption. The Company adopted this standard in the first quarter of fiscal 2018 using the modified retrospective method. The Company identified its loyalty program as the area that was most affected by the new revenue recognition guidance. Additionally, the Company’s historical accounting for gift card breakage is consistent with the new revenue recognition guidance. The Company’s gift card liability, net of estimated breakage, was $10.3 million, $11.3 million and $8.5 million as of November 3, 2018, February 3, 2018 and October 28, 2017, respectively, which is included in accrued expenses on the condensed consolidated balance sheet. During the 13-week period ended November 3, 2018, the Company recognized $1.8 million of gift card redemptions related to amounts included in the gift card contract liability balance of $10.4 million as of August 4, 2018. During the 39-week period ended November 3, 2018, the Company recognized $5.0 million of gift card redemptions related to amounts included in the gift card contract liability balance of $11.3 million as of February 3, 2018. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures. In May 2017, the FASB issued ASU 2017-09, “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting” (“ASU 2017-09”). This update provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. An entity should account for the effects of a modification unless (a) the fair value of the modified award is the same as the fair value of the original award immediately before the original award is modified, (b) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified and (c) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The amendments in ASU 2017-09 are effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those annual periods. Early adoption is permitted, including adoption in any interim period, for public business entities for reporting periods for which financial statements have not been issued. The amendments in ASU 2017-09 should be applied prospectively to an award modified on or after the adoption date. The Company adopted this guidance in the first quarter of fiscal 2018. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures. New Accounting Pronouncements Not Yet Adopted In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”, which supersedes the existing guidance for lease accounting, Leases (Topic 840) (“ASU 2016-02”). ASU 2016-02 requires lessees to recognize a lease liability and a right-of-use asset for all leases. Lessor accounting remains largely unchanged. In July 2018, the FASB issued ASU 2018-11, “Leases (Topic 842): Targeted Improvements,” which provides an optional transition method in addition to the existing modified retrospective transition method by allowing a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. Under this transition method, companies may continue to report comparative periods under ASC 840, although they must also provide the required disclosures under ASC 840 for all periods presented under ASC 840. These new leasing standards are effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted for all entities. The Company intends to adopt this guidance in the first quarter of fiscal 2019 using the optional transition method provided by ASU 2018-11. The Company is currently evaluating the impact of this new standard on its condensed consolidated financial statements and is anticipating a material impact on the Company’s consolidated financial statements because the Company is party to a significant number of lease contracts. |
Senior Credit Facility |
9 Months Ended |
---|---|
Nov. 03, 2018 | |
Debt Disclosure [Abstract] | |
Senior Credit Facility | Senior Credit Facility The Company is party to a Joinder and First Amendment to Amended and Restated Credit Agreement (the “Credit Agreement”) with Bank of America, N.A. as administrative agent and collateral agent, and the lenders named therein (the “Lenders”). The Credit Agreement includes a senior secured revolving credit facility of $75 million, a swingline availability of $10 million, a $25 million incremental accordion feature and a maturity date of February 2021. Borrowings under the Credit Agreement bear interest at an annual rate equal to LIBOR plus a margin ranging from 125 to 175 basis points with no LIBOR floor, and the fee paid to the Lenders on the unused portion of the credit facility is 25 basis points per annum. Borrowings under the Credit Agreement are subject to certain conditions and contain customary events of default, including, without limitation, failure to make payments, a cross-default to certain other debt, breaches of covenants, breaches of representations and warranties, a change in control, certain monetary judgments and bankruptcy and ERISA events. Upon any such event of default, the principal amount of any unpaid loans and all other obligations under the Credit Agreement may be declared immediately due and payable. The maximum availability under the facility is limited by a borrowing base formula which consists of a percentage of eligible inventory and eligible credit card receivables, less reserves. The Company is subject to an Amended and Restated Security Agreement (the “Security Agreement”) with its Lenders. Pursuant to the Security Agreement, the Company pledged and granted to the administrative agent, for the benefit of itself and the secured parties specified therein, a lien on and security interest in all of the rights, title and interest in substantially all of the Company’s assets to secure the payment and performance of the obligations under the Credit Agreement. As of November 3, 2018, the Company was in compliance with the covenants in the Credit Agreement, and there were no outstanding borrowings under the credit facility, with approximately $75.0 million available for borrowing. |
New Accounting Pronouncements (Policies) |
9 Months Ended |
---|---|
Nov. 03, 2018 | |
Accounting Changes and Error Corrections [Abstract] | |
New Accounting Pronouncements Recently Adopted | New Accounting Pronouncements Recently Adopted In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). Under ASU 2014-09, an entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects what it expects in exchange for the goods or services. ASU 2014-09 also requires more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amendments in ASU 2014-09 were effective for the Company at the beginning of its fiscal 2018 year. Companies that transitioned to this new standard could either retrospectively restate each prior reporting period or reflect the cumulative effect of initially applying the updates with an adjustment to retained earnings at the date of adoption. The Company adopted this standard in the first quarter of fiscal 2018 using the modified retrospective method. The Company identified its loyalty program as the area that was most affected by the new revenue recognition guidance. Additionally, the Company’s historical accounting for gift card breakage is consistent with the new revenue recognition guidance. The Company’s gift card liability, net of estimated breakage, was $10.3 million, $11.3 million and $8.5 million as of November 3, 2018, February 3, 2018 and October 28, 2017, respectively, which is included in accrued expenses on the condensed consolidated balance sheet. During the 13-week period ended November 3, 2018, the Company recognized $1.8 million of gift card redemptions related to amounts included in the gift card contract liability balance of $10.4 million as of August 4, 2018. During the 39-week period ended November 3, 2018, the Company recognized $5.0 million of gift card redemptions related to amounts included in the gift card contract liability balance of $11.3 million as of February 3, 2018. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures. In May 2017, the FASB issued ASU 2017-09, “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting” (“ASU 2017-09”). This update provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. An entity should account for the effects of a modification unless (a) the fair value of the modified award is the same as the fair value of the original award immediately before the original award is modified, (b) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified and (c) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The amendments in ASU 2017-09 are effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those annual periods. Early adoption is permitted, including adoption in any interim period, for public business entities for reporting periods for which financial statements have not been issued. The amendments in ASU 2017-09 should be applied prospectively to an award modified on or after the adoption date. The Company adopted this guidance in the first quarter of fiscal 2018. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures. New Accounting Pronouncements Not Yet Adopted In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”, which supersedes the existing guidance for lease accounting, Leases (Topic 840) (“ASU 2016-02”). ASU 2016-02 requires lessees to recognize a lease liability and a right-of-use asset for all leases. Lessor accounting remains largely unchanged. In July 2018, the FASB issued ASU 2018-11, “Leases (Topic 842): Targeted Improvements,” which provides an optional transition method in addition to the existing modified retrospective transition method by allowing a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. Under this transition method, companies may continue to report comparative periods under ASC 840, although they must also provide the required disclosures under ASC 840 for all periods presented under ASC 840. These new leasing standards are effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted for all entities. The Company intends to adopt this guidance in the first quarter of fiscal 2019 using the optional transition method provided by ASU 2018-11. The Company is currently evaluating the impact of this new standard on its condensed consolidated financial statements and is anticipating a material impact on the Company’s consolidated financial statements because the Company is party to a significant number of lease contracts. |
Stock-Based Compensation (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Nov. 03, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | The table below sets forth selected stock-based compensation information (in thousands, except share amounts) for the periods indicated:
|
Related Party Transactions (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Nov. 03, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Selected Results to Vendor in Dollars and Percentages | The table below sets forth selected results related to this vendor in dollars (in thousands) and percentages for the periods indicated:
|
Stock Repurchase Program (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Nov. 03, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity, Class of Treasury Stock [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class of Treasury Stock [Table Text Block] | The table below sets forth selected stock repurchase plan information (in thousands, except share amounts) for the periods indicated:
|
Basis of Presentation (Details) $ in Thousands |
3 Months Ended | 9 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Nov. 03, 2018
USD ($)
store
state
|
Oct. 28, 2017
USD ($)
|
Nov. 03, 2018
USD ($)
store
state
|
Oct. 28, 2017
USD ($)
|
Feb. 03, 2018
USD ($)
|
|||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||||||||
Number of home decor and gifts store | store | 432 | 432 | |||||||||
Number of states | state | 37 | 37 | |||||||||
Reclassification of supplies inventory to prepaid expenses and other current assets (balance sheet) | $ 23,314 | $ 25,644 | [1] | $ 23,314 | $ 25,644 | [1] | $ 15,988 | ||||
Reclassification to (from) cost of sales | 107,918 | 99,508 | 302,161 | 281,098 | |||||||
Reclassification of supplies inventory to prepaid expenses and other current assets (cash flow) | (2,318) | (2,396) | [1] | ||||||||
Reclassification of depreciation to cost of sales | 95,289 | 87,840 | [2] | 267,619 | 248,820 | [2] | |||||
Restatement Adjustment [Member] | |||||||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||||||||
Reclassification of supplies inventory to prepaid expenses and other current assets (balance sheet) | 2,600 | 2,600 | |||||||||
Reclassification to (from) cost of sales | $ 700 | $ 700 | (1,200) | ||||||||
Reclassification of supplies inventory to prepaid expenses and other current assets (cash flow) | (300) | ||||||||||
Reclassification of depreciation to cost of sales | $ 5,100 | $ 14,800 | |||||||||
|
Income Taxes (Details) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Nov. 03, 2018 |
Oct. 28, 2017 |
Nov. 03, 2018 |
Oct. 28, 2017 |
|
Income Tax Disclosure [Abstract] | ||||
Effective tax rate | 19.70% | 34.50% | 23.60% | 34.10% |
Loss Per Share (Details) - shares shares in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Nov. 03, 2018 |
Oct. 28, 2017 |
Nov. 03, 2018 |
Oct. 28, 2017 |
|
Earnings Per Share [Abstract] | ||||
Stock options and restricted stock units not included in the computation of diluted earnings per share (in shares) | 1.2 | 1.6 | 1.3 | 1.5 |
Fair Value of Financial Instruments (Details) - USD ($) $ in Millions |
Nov. 03, 2018 |
Feb. 03, 2018 |
Oct. 28, 2017 |
---|---|---|---|
Fair Value of Financial Instruments [Abstract] | |||
Deferred Compensation Plan Assets | $ 2.1 | $ 2.2 | $ 2.2 |
Deferred Compensation Liability, Classified, Noncurrent | $ 2.1 | $ 2.2 | $ 2.2 |
Stock-Based Compensation (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Nov. 03, 2018 |
Oct. 28, 2017 |
Nov. 03, 2018 |
Oct. 28, 2017 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock-based compensation expense (included in compensation and benefits on the condensed consolidated statements of operations) | $ 450 | $ 582 | $ 1,341 | $ 1,766 |
Stock options granted (in shares) | 0 | 0 | 157,700 | 245,000 |
Restricted stock units granted (in shares) | 132,834 | 2,000 | 243,734 | 148,500 |
Related Party Transactions (Details) - Merchandise purchases - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Nov. 03, 2018 |
Oct. 28, 2017 |
Nov. 03, 2018 |
Oct. 28, 2017 |
|
Related Party Transaction [Line Items] | ||||
Purchases as a percent of total merchandise purchases | 22.50% | 20.40% | 21.10% | 21.50% |
Related party vendor | ||||
Related Party Transaction [Line Items] | ||||
Purchases | $ 17,444 | $ 17,684 | $ 41,966 | $ 41,743 |
Stock Repurchase Program (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|
Nov. 03, 2018 |
Oct. 28, 2017 |
Nov. 03, 2018 |
Oct. 28, 2017 |
Sep. 24, 2018 |
Aug. 22, 2017 |
|
Treasury Stock Transactions [Abstract] | ||||||
Stock Repurchase Program, Authorized Amount | $ 10,000 | $ 10,000 | ||||
Stock Repurchased and Retired During Period, Shares | 689,473 | 18,901 | 1,082,117 | 18,901 | ||
Payments for Repurchase of Common Stock | $ 6,554 | $ 218 | $ 10,358 | $ 218 | ||
Stock Repurchase Program, Remaining Authorized Repurchase Amount | $ 9,000 | $ 9,000 |
New Accounting Pronouncements Revenue Recognition ASU (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Nov. 03, 2018 |
Nov. 03, 2018 |
Aug. 04, 2018 |
Feb. 03, 2018 |
Oct. 28, 2017 |
|
New Accounting Pronouncements [Abstract] | |||||
Gift Card Liability, Current | $ 10.3 | $ 10.3 | $ 10.4 | $ 11.3 | $ 8.5 |
Gift Card Liability, Revenue Recognized | $ 1.8 | $ 5.0 |
Senior Credit Facility (Details) - Secured credit facility - Revolving credit facility |
9 Months Ended |
---|---|
Nov. 03, 2018
USD ($)
| |
Line of Credit Facility [Line Items] | |
Line of credit facility maximum borrowing capacity | $ 75,000,000 |
Swingline availability | $ 10,000,000 |
Percentage of fee on unused portion of the facility | 0.25% |
Incremental accordion feature | $ 25,000,000 |
Outstanding borrowings under the credit facility | 0 |
Available borrowing capacity of line of credit facility | $ 75,000,000 |
Minimum | |
Line of Credit Facility [Line Items] | |
Interest at an annual rate equal to LIBOR plus a margin range | 1.25% |
Maximum | |
Line of Credit Facility [Line Items] | |
Interest at an annual rate equal to LIBOR plus a margin range | 1.75% |
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