For the first quarter, net sales increased 9.3% to $92.6 million, up from $84.7 million for the similar period in 2005, while comp-store sales decreased 5.1%, an improvement over last year's 10.4%-decrease.
Kirkland's CEO Robert E. Alderson said during the chain's earnings conference call that customer traffic was particularly weak in the mall locations, with comps decreasing 6.8% compared to the 0.9% decline for off-mall sites.
The poor performance of its mall stores has compelled the chain to shift its store portfolio to off-mall locations. "By the end of fiscal 2006, we expect off-mall locations to account for the majority of our store base for the first time," Alderson said. "We believe this transition will lead to better sales and operating margins."
At the end of the quarter, Kirkland's store base was comprised of 192 mall locations and 146 off-mall locations, with approximately 70% of the comparable store base comprised of mall locations. During 2006, the chain expects to open 60 new stores and close 30 stores.
During the earnings conference call, the home décor chain also issued earnings guidance for the second quarter 2006. It expects an improvement over last year, but also predicts the second quarter will be worse than its first quarter.
For the second quarter, Kirkland's expects a net loss of between 23 cents and 27 cents per diluted share, compared with a net loss of 29 cents per diluted share in the prior-year period. Net sales are expected to be in a range from $93 million to $96 million, with a comparable store sales decrease of between 4% and 7% compared with net sales of $86.8 million and a comparable store sales decline of 10.2% for the same period in 2005.
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