Kirkland's, Inc. (NASDAQ: KIRK) today reported financial results for the 13 weeks ended April 30, 2011.

Net sales for the 13 weeks ended April 30, 2011, were $94.4 million compared with $93.5 million for the prior-year quarter. Comparable store sales for the first quarter of fiscal 2011 decreased 8.4% compared with a 12.6% increase in the prior-year quarter. The Company opened 3 stores and closed 10 stores during the first quarter of 2011, bringing the total number of stores to 293 as of quarter’s end.

The Company reported net income of $3.2 million, or $0.15 per diluted share, for the first quarter of fiscal 2011 compared with net income of $6.5 million, or $0.32 per diluted share, for the first quarter of fiscal 2010.

Robert Alderson, Kirkland's President and Chief Executive Officer, said, “The first quarter was what we thought it would be – productive, but a tough comparison to our best first quarter as a public company, a more promotional environment, and higher freight costs weighing on merchandise margin. We continue to position the company for a stronger second half of the year with emphasis on improvement in some of our key merchandising categories while managing through an environment of higher sourcing and input costs. Our strong cash flow and balance sheet cash position give us the flexibility to invest in new information systems and new store growth as well as actively evaluate other potential uses of cash to improve shareholder value.”

Fiscal 2011 Performance Goals

Store Growth:

At quarter end, the Company had 293 stores compared with 300 at the beginning of 2011 and 281 at the end of the prior-year period. For fiscal 2011, the Company now expects to open approximately 20 net new stores, representing square footage growth of slightly more than 10%. New store activity will be heavily weighted toward the second half of the year. Store closings will typically coincide with replacement store openings.
Sales: The Company expects total sales for fiscal 2011 to increase in the range of 6% to 8% compared with fiscal 2010. This level of sales growth would imply low-single-digit negative comparable store sales for the fiscal year.
Margins: Based on the current outlook, the Company expects operating margin in fiscal 2011 to be below that of fiscal 2010 due to an anticipated increase in sourcing and transportation costs and deleverage on the fixed components of operating expenses due to low-single-digit negative comparable store sales.
Earnings: Based on the above assumptions, the Company would expect earnings per share for fiscal 2011 to be $0.95 to $1.05 per diluted share. The current assumption for the effective tax rate is in the range of 38.5% for fiscal 2011.
Cash Flow: The Company expects to fully fund its new store growth and technology improvements through cash generated from operations. Capital expenditures are estimated to range between $23 million and $26 million for fiscal 2011.

Second Quarter Fiscal 2011 Outlook

The Company issued guidance for the second quarter ending July 30, 2011, of net income of $0.01 to $0.05 per diluted share, compared with $0.16 per diluted share a year ago. Net sales are expected to be $92 million to $94 million, with a comparable store sales decrease in the mid-single-digit range, compared with net sales of $89.5 million and a comparable store sales increase of 1.0% in the prior-year period. The Company expects to open approximately 8 to 10 stores during the quarter, and close approximately 5 stores during the quarter.

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