NASHVILLE, Tenn.-Although sales increased and expenses were held relatively in check, Kirkland’s reported a 9.3 percent drop in first-quarter net income, to $1.8 million.
Net sales increased 3.5 percent to $101.2 million in the quarter, which ended on May 4. Included in this was a same-store sales decline of 2.3 percent, resulting from reduced traffic in the company’s stores, according to W. Michael Madden, Kirkland’s chief financial officer, who commented on the results on a conference call to retail analysts.
Operating expenses rose 1.5 percent in dollars and fell 63 basis points as a percentage of sales, to 32.4 percent. However, gross margin decreased 41 basis points to 38.9 percent, due to reduced merchandise margins and higher freight costs, Madden said.
Based on these results, Kirkland’s said it expects total sales for the fiscal year to rise from 3 to 5 percent, with flat results in same-store sales. Robert Alderson, the retailer’s president and CEO, said trends that emerged later in the first quarter pointed to increased sales and margins ahead. “However, there is still much work to do in firmly establishing a positive merchandising trend as well as leveraging our ongoing investments in technology, growing e-commerce, improving traffic, focusing on tight expense controls and executing our new branding initiatives,” Alderson said.