Dive Brief:
- Kirkland’s has secured an additional $12 million credit line. The home and furniture retailer said Friday that the supplemental financing will provide more liquidity as it works to reposition itself.
- The newest round of debt financing is through a new first-in last-out, asset-based, delayed-draw term loan facility. It’s in addition to the company's existing $90 million asset-based revolving credit facility.
- Kirkland’s said its combined credit availability currently stands at about $21.5 million. The added capital will allow the retailer to continue its strategic turnaround plans.
Dive Insight:
Kirkland’s ended the third quarter with $62 million in outstanding debt under its senior secured revolving credit facility. The company also had $35 million under its senior secured revolving credit line. Net sales for Q3 fell 11.1% to $116.4 million from about $131 million the prior year.
The retailer will begin the year with new leadership. Amy Sullivan will become chief executive officer on Feb. 4. Sullivan, who has been with the company for a decade, replaces interim CEO Ann Joyce, who’s held the role since May.
“The additional capital provides us with sufficient room to continue executing our strategic repositioning, while giving us the ability to accelerate components of our strategy aimed at returning the company to historical levels of performance,” Chief Financial Officer Mike Madden said in a statement.
During the company’s most recent earnings call, Madden said Kirkland’s planned to expand its borrowing capacity to support its turnaround efforts. “Once that milestone is achieved, we plan to focus our efforts on reinvesting in the business,” Madden said. “And from there, we can start looking at share repurchases and dividends as additional ways to return value to our shareholders.”
Madden also said Kirkland’s wants to build its liquidity position to the point where the company “can play a little more offense than we’re playing right now.”
Retail’s home and furniture sector was down for most of last year, according to data from the U.S. Department of Commerce. Sales in the sector fell 7.2% in December.
Over the last 12 months, several prominent home-focused retailers filed for bankruptcy, including Bed Bath & Beyond, Tuesday Morning and Mitchell Gold & Bob Williams.
In a note this month, Wedbush analysts led by Seth Basham projected low single-digit year-over-year growth for home furnishings sales this year following a likely mid-single-digit decline in 2023. Improved consumer confidence, a rebounding housing market and a more stable competitive environment will benefit the sector, Basham said.
“Importantly, we expect industry promotions and clearance will be, at worst, in line with this year as we expect industry inventories will have reached a healthier equilibrium with current demand levels, with upside potential for pricing should demand accelerate in tandem with forecasted housing improvements in the [second half],” Basham said.
Kirkland's currently operates 338 stores in 35 states. The company recently landed on Retail Dive’s bankruptcy watchlist. CreditRiskMonitor rated the retailer a two on its FRISK scoring system as of Oct. 2, indicating a roughly 4% to 10% chance of bankruptcy within 12 months.
