Like a bull in a china shop, the negative trends that have been hitting home decor retailer Kirkland's (NASDAQ:KIRK) for a whilenow rampaged through the current quarter. Same-store sales plummeted nearly 19%, and losses more than doubled to $7.3 million.
The company continues to struggle with the turnaround "effort" that Fool contributor David Meier discussed last quarter. The retailer overemphasized a broad array of new initiatives, which ultimately failed to ignite consumer interest, and fell short on its core components, leaving the company reeling.
Comps are falling ever faster; their rate of decline has more than tripled from last year. You might be tempted to say that next quarter will bring "easier" comparisons, since sales were so awful in the last year's Q2 (when comps fell 9%). But sales have been horrible for some time. Kirkland's hasn't increased comps since Q1 2004, logging 11 straight quarters of falling same-store sales since. Its operations recall Warren Buffett's admonition to tread carefully in special situations, because turnarounds rarely turn around.
The home decor retailer is in freefall right now, with no safety net in sight. Abandoning its mall-based store strategy might be a start, but unless the company has items people want to buy, its stores' locations won't matter much.
One area actually did see some customer support: what Kirkland's calls "alternative wall decor." While comps actually increased in this segment, the company didn't have enough product on hand to meet demand, nor a deep enough selection to generate additional buys. Despite management assurances to the contrary, there's nothing to suggest next quarter won't be just as dismal.
Disappointing results are not endemic to Kirkland's, but rather to the whole home furnishings industry. Tuesday Morning (NASDAQ:TUES), Restoration Hardware (NASDAQ:RSTO), and Pier 1 Imports (NYSE:PIR) have all been experiencing slack demand. The failure of Kirkland's effort in the gifts category also echoes the troubles Blyth (NYSE:BTH) has been reporting, though the shortcomings here seem more pronounced.
As both Target (NYSE:TGT) and Wal-Mart (NYSE:WMT) have expanded their home decor selections, improving both quality and quantity, they've become first-in-mind sources for shoppers. It makes the relevancy of a lower tier retailer like Kirkland's even more questionable, and there's certainly no bull market for the company's stock.
Tuesday Morning is a Motley Fool Income Investor recommendation. Wal-Mart is a Motley Fool Inside Value selection. Both market-beating newsletters are available for a free trial.
Fool contributor Rich Duprey owns shares of Wal-Mart but does not have a financial position in any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.
