SC 13D

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934

(Amendment No. 2 to Schedule 13G)

KIRKLAND’S, INC.

(Name of Issuer)

Common Stock

(Title of Class of Securities)

497498105

(CUSIP Number)

John H. Lewis

Osmium Partners, LLC

300 Drakes Landing Road, Suite 172

Greenbrae, CA  94904

(415) 235-5089

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)

April 28, 2022

(Date of Event Which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§ 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. ☒

* The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter the disclosures provided in a prior cover page.  

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section of the Exchange Act but shall be subject to all other provisions of the Exchange Act (however, see the Notes).

CUSIP No. 497498105

1	NAMES OF REPORTING PERSONS
	John H. Lewis
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP			(a)	☐
				(b)	☒
3	SEC USE ONLY
4	SOURCE OF FUNDS (SEE INSTRUCTIONS)
	WC
5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(D) OR 2(E)				☐
6	CITIZENSHIP OR PLACE OF ORGANIZATION
	United States
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER
			111,231
		8	SHARED VOTING POWER
			1,563,250
		9	SOLE DISPOSITIVE POWER
			111,231
		10	SHARED DISPOSITIVE POWER
			1,563,250
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
	1,674,481
12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)				☐
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
	13.6%
14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
	IN

CUSIP No. 497498105

1	NAMES OF REPORTING PERSONS
	Osmium Partners, LLC
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP			(a)	☐
				(b)	☒
3	SEC USE ONLY
4	SOURCE OF FUNDS (SEE INSTRUCTIONS)
	WC
5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(D) OR 2(E)				☐
6	CITIZENSHIP OR PLACE OF ORGANIZATION
	Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER
			0
		8	SHARED VOTING POWER
			1,563,250
		9	SOLE DISPOSITIVE POWER
			0
		10	SHARED DISPOSITIVE POWER
			1,563,250
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
	1,563,250
12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)				☐
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
	12.7%
14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
	IA, OO

CUSIP No. 497498105

1	NAMES OF REPORTING PERSONS
	Osmium Capital, LP
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP			(a)	☐
				(b)	☒
3	SEC USE ONLY
4	SOURCE OF FUNDS (SEE INSTRUCTIONS)
	WC
5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(D) OR 2(E)				☐
6	CITIZENSHIP OR PLACE OF ORGANIZATION
	Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER
			0
		8	SHARED VOTING POWER
			805,599
		9	SOLE DISPOSITIVE POWER
			0
		10	SHARED DISPOSITIVE POWER
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
	805,599
12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)				☐
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
	6.5%
14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
	PN

CUSIP No. 497498105

1	NAMES OF REPORTING PERSONS
	Osmium Capital II, LP
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP			(a)	☐
				(b)	☒
3	SEC USE ONLY
4	SOURCE OF FUNDS (SEE INSTRUCTIONS)
	WC
5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(D) OR 2(E)				☐
6	CITIZENSHIP OR PLACE OF ORGANIZATION
	Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER
			0
		8	SHARED VOTING POWER
			223,390
		9	SOLE DISPOSITIVE POWER
			0
		10	SHARED DISPOSITIVE POWER
			223,390
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
	223,390
12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)				☐
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
	1.8%
14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
	PN

CUSIP No. 497498105

1	NAMES OF REPORTING PERSONS
	Osmium Spartan, LP
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP			(a)	☐
				(b)	☒
3	SEC USE ONLY
4	SOURCE OF FUNDS (SEE INSTRUCTIONS)
	WC
5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(D) OR 2(E)				☐
6	CITIZENSHIP OR PLACE OF ORGANIZATION
	Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER
			0
		8	SHARED VOTING POWER
			212,860
		9	SOLE DISPOSITIVE POWER
			0
		10	SHARED DISPOSITIVE POWER
			212,860
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
	212,860
12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)				☐
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
	1.7%
14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
	PN

CUSIP No. 497498105

1	NAMES OF REPORTING PERSONS
	Osmium Diamond, LP
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP			(a)	☐
				(b)	☒
3	SEC USE ONLY
4	SOURCE OF FUNDS (SEE INSTRUCTIONS)
	WC
5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(D) OR 2(E)				☐
6	CITIZENSHIP OR PLACE OF ORGANIZATION
	Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER
			0
		8	SHARED VOTING POWER
			321,401
		9	SOLE DISPOSITIVE POWER
			0
		10	SHARED DISPOSITIVE POWER
			321,401
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
	321,401
12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)				☐
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
	2.6%
14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
	PN

Item 1. Security and Issuer

This Schedule 13D relates to the common stock, no par value per share (the “Common Stock”) of Kirkland’s Inc., a Tennessee corporation (the “Issuer”). The principal executive office of the Issuer is located at 5310 Maryland Way, Brentwood, TN 37027. The Reporting Persons (as defined below) previously filed a Schedule 13G on August 24, 2020, as amended on January 18, 2022 (the “Schedule 13G”). This Schedule 13D constitutes a second amendment of the Schedule 13G.

Item 2. Identity and Background.

(a) This Schedule 13D is being filed by John H. Lewis, the controlling member of Osmium Partners, LLC, a Delaware limited liability company (“Osmium Partners”), which serves as the general partner of Osmium Capital, LP, a Delaware limited partnership (“Fund I”), Osmium Capital II, LP, a Delaware limited partnership (“Fund II”), Osmium Spartan, LP, a Delaware limited partnership (“Fund III”), and Osmium Diamond, LP a Delaware limited partnership (“Fund IV” and together with Fund I, Fund II and Fund III, the “Funds”) (all of the foregoing, collectively, the “Reporting Persons”). Mr. Lewis and Osmium Partners may be deemed to share with the Funds (and not with any third party) voting and dispositive power with respect to such shares. Each Reporting Person disclaims beneficial ownership with respect to any shares other than the shares owned directly by such Reporting Person.

(b) The principal business office of the Reporting Persons is 300 Drakes Landing Road, Suite 172, Greenbrae, CA 94904.

(c) The principal business of each of the Funds is that of a private investment vehicle engaged in investing and trading in a wide variety of securities and financial instruments for its own account. The principal business of Osmium Partners is providing investment management services and serving as the general partner of the Funds. Mr. Lewis’ principal occupation is serving as the Managing Member of Osmium Partners.

(d) During the past five years, no Reporting Person has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors).

(e) During the past five years, no Reporting Person has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

(f) Mr. Lewis is a citizen of the United States. The other Reporting Persons were organized in the State of Delaware.

Item 3. Source and Amount of Funds or Other Consideration

The source and amount of funds (excluding commissions) used by the Reporting Persons in making their purchase of the shares of Common Stock owned by each of them in the aggregate was approximately $18.0 million from working capital.

One or more of the Reporting Persons effect purchases of securities through margin accounts which may extend margin credit to the Reporting Persons as and when required to open or carry positions in the margin accounts, subject to applicable federal margin regulations, stock exchange rules and brokers’ credit policies. In such instances, the positions held in the margin accounts are pledged as collateral security for the repayment of debit balances in the accounts.

Item 4. Purpose of Transaction.

The Reporting Persons purchased the Common Stock based on the belief that such securities, when purchased, were undervalued and represented an attractive investment opportunity. Although no Reporting Person has any specific plan or proposal to acquire or dispose of the Common Stock, consistent with its investment purpose, each Reporting Person at any time and from time to time may acquire additional Common Stock or dispose of any or all of its Common Stock depending upon an ongoing evaluation of the investment in the Common Stock, prevailing market conditions, other investment opportunities, liquidity requirements of the Reporting Persons, and/or other investment considerations. The purpose of the acquisitions of the Common Stock was for investment, and the acquisitions of the Common Stock were made in the ordinary course of business and were not made for the purpose of acquiring control of the Issuer.

On April 28, 2022, the Reporting Persons delivered a letter to the Issuer’s board of directors urging the Issuer to increase and execute an accelerated share repurchase of 50% of the Issuer’s outstanding shares of Common Stock for the reasons set forth therein. The letter is attached as Exhibit 1 hereto and is incorporated by reference herein.

Except as disclosed above, none of the Reporting Persons has any other plans or proposals which relate to, or would result in, any of the matters referred to in paragraphs (a) through (j), inclusive, of the instructions to Item 4 of Schedule 13D. The Reporting Persons may, at any time and from time to time, review or reconsider their position and/or change their purpose and/or formulate plans or proposals with respect thereto.

Item 5. Interest in Securities of the Issuer.

(a)-(b) The information contained in lines 7 to 11 and 13 of the cover pages of this Schedule 13D is incorporated herein by reference. The percentage ownership reflected in line 13 of the cover pages is based on 12,331,347 shares of Common Stock outstanding on March 14, 2022, as disclosed in the Issuer’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 25, 2022.

(c) None of the Reporting Persons have effected any transaction in Common Stock during the past sixty (60) days.

(d) To the knowledge of the Reporting Persons, no other person has the right to receive or the power to direct the receipt of dividends from, or the proceeds of the sale of, the securities that are the subject of this Schedule 13D.

(e) Not applicable.

Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer.

On April 28, 2022, the Reporting Persons entered into a Joint Filing Agreement in which the Reporting Persons agreed to the joint filing on behalf of each of them of statements on Schedule 13D with respect to securities of the Issuer, to the extent required by applicable law. The Joint Filing Agreement is attached hereto as Exhibit 2 and is incorporated herein by reference.

Item 7. Material to be Filed as Exhibits.

1	Letter from the Reporting Persons to the Issuer, dated April 28, 2022.
2	Joint Filing Agreement.

SIGNATURES

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

Dated: April 28, 2022

John H. Lewis
Osmium Partners, LLC
Osmium Capital, LP
Osmium Capital II, LP
Osmium Spartan, LP
Osmium Diamond, LP
By:	/s/ John H. Lewis
John H. Lewis, for himself and as
Managing Member of Osmium
Partners, LLC, for itself and as
General Partner of Osmium
Capital, LP, Osmium Capital II,
LP, Osmium Spartan, LP, and
Osmium Diamond, LP

JOINT FILING AGREEMENT

In accordance with Rule 13d-1(k) under the Securities Exchange Act of 1934, as amended, the persons named below agree to the joint filing on behalf of each of them of a statement on Schedule 13D (including amendments thereto) with respect to the Common Stock of Kirkland’s, Inc., and further agree that this Joint Filing Agreement be included as an Exhibit to such joint filing. In evidence thereof, the undersigned hereby execute this Agreement.

Dated: April 28, 2022

John H. Lewis
Osmium Partners, LLC
Osmium Capital, LP
Osmium Capital II, LP
Osmium Spartan, LP
Osmium Diamond, LP
By:	/s/ John H. Lewis
John H. Lewis, for himself and as
Managing Member of Osmium
Partners, LLC, for itself and as
General Partner of Osmium
Capital, LP, Osmium Capital II,
LP, Osmium Spartan, LP, and
Osmium Diamond, LP

EX-99.1

Exhibit 1

Osmium Urges Kirkland’s Board to Increase & Execute an Accelerated Share Repurchase of 50% of the Outstanding Shares

• Over the last ten years, Kirkland’s has generated approximately $300 million in operating cash flow or 3x the current market cap

• Over the last 20 years, Kirkland’s has generated approximately $600 million in operating cash flow or 6x the current market cap

• Currently, Kirkland’s has $80 million in cash and untapped access to capital which is equal to the market capitalization

• We believe the company can borrow at 2% and could potentially buy 50% of the outstanding shares, which are currently trading at 2.5x the 20-year average annual operating cash flow

Dear Kirkland’s Board Members:

Osmium Partners has been an investor in Kirkland’s since May 2020 and currently owns 13% of the outstanding common shares. To date, we have been very impressed with the management team and the Board’s efforts in building a high-quality business. We believe Kirkland’s current valuation of less than $84 million represents an immediate opportunity for the Board to increase shareholder value materially. We believe Kirkland’s $75 million untapped asset-backed line (ABL), cash, and at least $115 million in inventory provide the liquidity needed to repurchase shares aggressively. For example, in 2020, inventory started the year at $95 million and finished at $63 million, and the company generated $78 million in cash flow.

We believe Kirkland’s current business model is a higher quality business and more valuable than in the past. Kirkland’s capital-light model now only requires the company to invest approximately 2% of sales on capital expenditures. Kirkland’s e-commerce revenue has grown significantly over the last several years to generate roughly $12 per share, while the company’s retail stores generate about $33 in sales per share.  This suggests to us a valuation of 0.12x sales (excluding leases) vs. a peer group of approximately 1x sales. In addition, we believe Kirkland’s has substantial opportunities to maximize cash flow since inventory is 120% of market cap with 5x annual inventory turns (Kirkland’s is valued at only 0.8x inventory/market cap vs. publicly traded peers at 7.6x).

Capital Sourcing:We believe Kirkland’s could fund a 50% repurchase or $42 million fairly easily:

1. Kirkland’s has $115 million in “unlevered” inventory; Kirkland’s can borrow $74 million at approximately 1.25-1.75%  interest on their current credit facility.

2. We believe Kirkland’s, with 4x-5x annual inventory turns and $115 million in inventory, could simply sell down “unlevered” inventory as well as holding $25 million in cash should be more than sufficient liquidity to aggressively buy up to 6 million shares very quickly.

3. Kirkland’s would simply make future inventory purchases on their credit facility and then pay off in fairly short order.

4. We believe Kirkland’s is set up for a massive value-creating opportunity to borrow at 2% and buy shares at roughly 2.5x the last 20 years’ earnings power or roughly 40% yield.

Last year, the company spent $37 million to repurchase 13% of the outstanding shares. Now, for a mere $5 million more or $42 million, the company can repurchase 50% of the outstanding shares. Alternatively, if Kirkland’s paid a $2.00 dividend immediately, we believe the stock would likely exceed $20 per share. Still, we believe the best way to drive shareholder value is to execute an aggressive share repurchase program.

Please consider the following key points:

1. Kirkland’s is trading for less than 2.4x the company’s 10-year and 20-year average annual operating cash flow, which is approximately $30 million. We believe Kirkland’s private market value is at least 8x operating cash flow minus CapEx.

2. Kirkland’s is trading at approximately 0.8x inventory/market cap with an average of roughly 4x-5x annual inventory turns, which we believe should lead to material cash generation later this year.

3. By our estimates, Kirkland’s implied guidance from the company’s March earnings call suggests a fiscal year-end January 2023 net cash balance of $5+ per share or approximately $60 million, which is a $35 million increase from January 2022. While the macro environment is changing, we believe Kirkland’s should grow cash flows at an attractive rate from the current levels.

Valuation Data Points: Kirkland’s vs. Public Peers

• Kirkland’s is valued at 1.9x its trailing 12-month market capitalization/EBITDA vs. public peers at 8.2x

• Kirkland’s tangible book value is 1.2x vs. public peers at 5x

• Kirkland’s has a net cash position (excluding leases)

We believe a 50% share repurchase that reduces the share count to 6.1 million could result in the following outcomes:

• Bear Case: $500 million in sales at 4% EBITDA margins = $3.30 per share in EBITDA

• Base Case: $550 million in sales at 10% EBITDA margins = $9.00 per share in EBITDA

• Bull Case: $600 million in sales at 15% EBITDA margins = $14.75 per share in EBITDA

We understand the challenging macro environment; however, Kirkland’s balance sheet is well-positioned to generate significant cash flows and is considerably under-levered. As shown above, we believe there is no more powerful lever to drive cash per share than a very large repurchase of shares at the current valuation. As Warren Buffett accurately describes, “Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.”

Thank you for your consideration.

Regards,

John Hartnett Lewis

Disclaimer: Certain factual and statistical (both historical and projected) industry and market data and other information contained herein was obtained by Osmium Partners from independent, third-party sources that it deems to be reliable. However, Osmium Partners has not independently verified any of such data or other information, or the reasonableness of the assumptions upon which such data and other information was based, and there can be no assurance as to the accuracy of such data and other information. Further, many of the statements and assertions contained herein reflect the belief of Osmium Partners, which belief may be based in whole or in part on such data and other information. The analyses provided may include certain statements, assumptions, estimates, and projections prepared with respect to, among other things, the historical and anticipated operating performance of the companies. Such statements, assumptions, estimates, and projections reflect various assumptions by Osmium Partners concerning anticipated results that are inherently subject to significant economic, competitive, and other uncertainties and contingencies and have been included solely for illustrative purposes. No representations, express or implied, are made as to the accuracy or completeness of such statements, assumptions, estimates, or projections or with respect to any materials herein. Actual results may vary materially from the estimates and projected results contained herein. Past Osmium performance is not indicative of future results. Osmium takes at times highly concentrated positions. Osmium Partners disclaims any obligation to update this letter. The analyses contained herein are not, and do not purport to be appraisals of the assets, shares or business of any company or any other entity. This document does not constitute any recommendation to buy, sell or otherwise transact with any securities issued by or pertaining to any company or any other entity. Each party to whom this document is made available must make its own independent assessment of any company or any other entity after making such investigations and taking such advice as may be deemed necessary.