On March 16, home decor retailer Kirkland's (NASDAQ:KIRK) released earnings for the fourth quarter ended Feb. 3.

  • Sales grew 9.2% due to an extra week in the fourth quarter compared with the same quarter the previous year. Same-store sales decreased 6.1% for the quarter.
  • The company reported a $3.6 million benefit in gift card breakage (gift cards purchased but not redeemed) and $1.4 million in costs for discount certificate breakage.
  • Management opened 13 stores and closed 20 stores during the quarter. It expects to open 40 off-mall stores and close 40 stores, mainly in-mall, in 2007.

(Figures in millions, except per-share data.)

Income Statement Highlights

Q4 2006

Q4 2005

Change

Sales*

$167.5

$153.4

9.2%

Net Profit

$11.4

$10.1

13.3%

EPS

$0.58

$0.51

13.7%

Diluted Shares

19.6

19.6

0.3%

*Includes gift card breakage

Get back to basics with the income statement.

Margin Checkup

Q4 2006

Q4 2005

Change*

Gross Margin**

37.7%

34.9%

2.8

Operating Margin**

10.7%

10.8%

(0.1)

Net Margin

6.8%

6.6%

0.3

*Expressed in percentage points
**Does not include breakage

Margins are the earnings engine.

Balance Sheet Highlights

Assets

Q4 2006

Q4 2005

Change

Cash + ST Invest.

$25.4

$15.0

69.4%

Inventory

$44.8

$49.2

(8.9%)



Liabilities

Q4 2006

Q4 2005

Change

Accounts Payable

$20.6

$24.2

(15.1%)



The balance sheet reflects the company's health.

Cash Flow Highlights

The company did not issue a cash flow statement in its earnings release.

Free cash flow is a Fool's best friend.

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