Kirkland's, Inc.

Good day and welcome to Kirkland's first quarter 2020 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Tripp Sullivan of Investor Relations. Please go ahead.

Thank you, good morning, and welcome to Kirkland's conference call to review results for the first quarter of fiscal 2020. On the call this morning are Woody Woodward, Chief Executive Officer, and Nicole Strain, Chief Financial Officer. The results, as well as notice of the accessibility of this conference call on a listen-only basis over the Internet, were announced earlier this morning in a press release that has been covered by the financial media. Except for historical information discussed during this conference call, The statements made by company management are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause Kirkland's actual results in future periods to differ materially from forecasted results. Those risks and uncertainties are more fully described in Kirkland's filings with the Securities and Exchange Commission including the company's annual report on Form 10-K filed on March 29, 2019. And I'll turn it over to Woody.

Thanks, Tripp. I'm proud of how nimble and resilient our team has been throughout the last several months. Many of our customers were at home looking at their walls through this period and decided to make some changes. When they were ready to shop, we were ready for them. The adjustments we made to our business model, the right sizing, and the significant upgrading of our merchandise assortments all came together at the right time. I would also like to acknowledge the continued support and partnership with our vendors who enabled us to work through this unprecedented time. They deserve much of the credit for the improvement in our trends. We've learned a lot about ourselves, our customers, and what our team is capable of achieving during one of the most challenging periods in the history of retail. There are many aspects of the home furnishings industry that are already returning to normal. But as we've seen with a number of announcements of store closings, competitors liquidating, and consumers adopting new shopping behaviors and priorities, there are many aspects of the business that might not ever be the same again. We think that's a good thing for the future of Kirkland. We started 2020 with tremendous momentum from the significant year of transformation achieved in 2019. The key priorities we outlined a few months ago continue to guide us for 2020 and beyond and provide the foundation for the confidence we have in our business for the balance of the year. Before I get into what's driving that confidence level, let me update you on where we are with these priorities. Recall that our goal is to be in the consideration set for a complete decorating project. In addition to the finishing touches, we want our customers to see us as the resource for furnishing a home of any size on a budget, and we want to continue to move away from the mass merchant retailers to be the value home retail store within the specialty world. That all starts with further accelerating our product development to reinforce quality and relevancy. For the balance of the year, we will continue to build on the tabletop and other select furniture pieces, and we continue to test upholstery. These new assortments are resonating with our customers, as Nicole will discuss later, are selling at a higher margin rate than a year ago. We also set a goal to improve omnichannel via website enhancements, incremental digital spend, and expanded online assortment. We also want an in-store experience that closely is aligned with our omnichannel capabilities. Based on the strong e-commerce sales before, during, and after the pandemic, especially in fiscal May, I believe e-commerce will remain a key driver of our overall business strategy. With buy online, pick up in store now in place in all of our stores and the improvements we've already completed in our supply chain with the replacement of our distribution center with three more efficient hubs operating by third quarter, we can support that growth with better speed and profitability. While we expect to keep our overall marketing spend flat with last year, we're investing in improvements to the customer experience to drive customer acquisition and brand awareness. Over the next several months, we are relaunching our loyalty program and will offer extended credit options and broader delivery options beginning this quarter. Additionally, we will utilize our hard-won, leaner infrastructure to be nimbler in our response to changes in customer preferences and buying behaviors. These last few months have brought us closer to the customers. They told us, and as a result, bear it out so far, that they've missed Kirkland's, and they've really, really leaned into the stores they like. And lastly, we'll continue to preserve our capital to invest in the business. Nicole will describe in a moment the extensive measures we took to keep us on track for our year-end goal of no debt and positive cash. Now, in closing, let me spend a few moments on four reasons why we're confident about the direction of our business for the balance of the year. First, we took the opportunity to right-size the company and make it nimbler than it's ever been. That capability was on display very early on and in the pandemic when we were one of the first in the country to stand up contactless curbside pickup to great success. Second, we have less store-based competition. With the ongoing liquidation of Pier 1 and last week's announcement of Tuesday morning's bankruptcy and the closing of a third of their stores, we're seeing a significant amount of our stores lose competition within their markets. Third, we entered the pandemic with strong trends in the stores and online, and those accelerated online while the stores were closed, and the trends have returned in both channels since the stores have begun reopening. Fourth, our online business is being fueled by margin-friendly promotions and first-time shoppers. Collectively, these four factors have had a positive effect on our results to date in the second quarter. While there is much work ahead of us to continue to translate this confidence and nimbleness into sustained results, we believe we have a more favorable environment in which to operate and innovate going forward. Now I'll turn it over to Nicole Strain, our Chief Financial Officer.