Kirkland's, Inc.

Good morning, everyone, and welcome. Thank you for participating in today's conference call to discuss Kirkland's financial results for the first quarter ended April 29, 2023. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. Joining us today are Kirkland's home interim CEO, Ann Joyce, President and COO, Amy Sullivan, EVP and CFO, Mike Madden, and the company's external director of investor relations, Cody Cree. Following their remarks, we'll open the call for your questions. Before we go further, I would like to turn the call over to Mr. Cree as he reads the company's safe harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements. Also, just a reminder, the call is being recorded. Cody, please go ahead.

Thanks, Andrew. Except for historical information discussed during this conference call, the statements made by company management are forward-looking and may pursuant to the safe harbor provision 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 forecaster results. Those risks and uncertainties are more fully described in Kirkland's filings with the Securities and Exchange Commission. I'd like to remind everyone that this call will be available for replay through June 15, 2023. A webcast replay will also be available via the link provided in today's press release, as well as on the company's website at Kirkland's.com. Now, I'd like to turn the call over to Kirkland's home interim CEO, Anne Joyce. Anne, over to you.

Thank you, Cody, and good morning, everyone. It's great to be joining you in my new role as interim CEO. I've spent the last two years as a board member and have been in this role a little over two months. And while there's a great deal of work to be done, being involved at this level has reinforced my view that our best days are ahead. Before we get into the quarter's results, I want to comment on my initial impressions and talk about what's next. As discussed on our last call, we disappointed some of our loyal customers in recent years by placing too much emphasis on promoting higher ticket items. Our overall voice changed, and we struggled to keep our customers engaged. We missed some seasonally relevant times of the year that had historically brought strong customer response. Kirkland's appeal has always been its ever-changing, seasonally relevant product assortment that provides fashionable, curated looks, which our customers rely on to update their home decor affordably. Our highly nimble team diligently monitors the dominant homes the core trends, and quickly developed our merchandise assortment accordingly. This skill allows us to provide our customers with fresh products that are relevant, stylish, and within their budget. We are renewing this proven model while also expanding upon some of the recent successes that we've seen in the business. One of these successes has been the transformation of our sourcing model, allowing us to upgrade our design, enhance product quality, and improve margins. We've also learned a great deal about the furniture category and what works and what doesn't work for our customers. These lessons will allow us to appropriately refine our product assortment even more, ensuring it truly fits within our model and meets our customers' expectations. At our core, we are a value specialty home decor retailer, and this means that we use promotions and deals as strategic drivers to engage and excite our customers. In recent years, we've been reactional with our promotional strategy. Now, we are creating a strategic and intentional promotional calendar centered around seasonally relevant items at lower price points that we believe will drive more traffic. To maximize the promotions and sales events, we are ensuring that our messaging creates a call to action and showcases our renewed assortment. However, we're also leaving enough flexibility in our plans to be reactionary if the opportunity arises. We are an omnichannel retailer, which allows our customers to choose the engagement that fits their preference. Our real estate portfolio is very competitive, with more than 340 stores across 35 states. A recent assessment tells us that the vast majority of our stores are in healthy retail centers with strong anchor tenants and located in areas where our core customers live. While we are confident in the strength of our current physical store footprint, we know the customer that shops both channels spends twice as much as the single channel customer. Looking at our sales mix by channel, e-commerce represents 27% of our business today. And this makes our online platform our largest store. So we are focused on driving conversion, ensuring inventory availability and driving profitability. As an omni-channel platform, we need both of our channels firing on all cylinders, and we're spending a significant amount of time working towards that. By the end of 2022, we made significant progress strengthening our balance sheet by reducing inventory to 84 million and paying down 45 million of our debt. We shored this up in the first quarter through an extension of our credit facility. which provides for additional borrowing capacity during the upcoming peak season and extends the maturity date to March 2028. Out of everything we've discussed, I firmly believe that our greatest asset is our people, which includes our field leaders, our associates, and the distribution and corporate teams that support them. Their passion, dedication, and commitment to the customer is truly impressive. So we have a solid foundation to capitalize on. So what's next? Well, recently, we realigned our organizational structure, placing an emphasis on a high performance culture and ensuring we have the right people in the right position. I am fortunate to have Amy Sullivan and Mike Madden as our key partners during this transition. Amy was recently promoted to president and COO, and she has varied and increasing merchandising and operational responsibilities during her 10 years at Kirkland. And before that, she spent a decade in the fashion apparel industry, where she served in several merchandising leadership roles, and prior to that, in brand management roles at department stores. She is a talented and motivated leader. And Mike rejoined Kirkland's last year after spending four years as the CFO of a commercial real estate investment fund. Prior to that, Mike spent 17 years at Kirkland, serving in various senior-level capacities. He has a deep understanding of our business and our customers. Both Amy and Mike have broad industry and company-specific experience, which will be crucial as we execute our plans. We are also instilling a culture that views things first through the lens of the customer and the associate. We have launched two initiatives, our Voice of the Customer and our Voice of the Associate programs, geared to enhancing the overall brand experience. My experience is that These programs, if they're supported by a robust use of data-driven decision-making, can quickly galvanize an organization and drive change. We are still in the early stages, but I am encouraged by the organization's eagerness to embrace these changes. Our attention now turns to recapturing sales and product margin to better leverage our fixed cost base. This effort starts with and depends on our merchandise assortment and our value proposition. we have adjusted our assortment for the back half of 2023 to balance decorating, entertaining, and gifting with an emphasis on value decor under $20. Supporting these changes with a strong promotional plan and effective marketing should allow us to win back customers and generate top-line momentum. As we adjust our brand voice to recapture that style and value proposition, We expect to strike a balance between the broad category messages and personalized customer offers, leveraging the investment in our customer data platform. Supply chain costs have decreased substantially thanks to lower inbound freight rates, and we expect our internal costs to be lower due to reduced inventory levels and increased efficiency. You'll see some of these benefits already positively impacting our merchandise margin, with a 160 basis point year-over-year expansion in Q1. These factors help the overall margin equation, providing a path to improve on the prior year while giving us room to ensure our promotional strategies are effective and profitable. Continued tight expense management should provide better flow-through of any incremental sales that we generate. Looking forward to the coming months, we will be refining our long-term vision and strategic plans so that we can capitalize on our brand potential. We want to cement a strong brand identity centered around the value-oriented and stylish home decor with seasonal relevancy as well as compelling, entertaining, and gift options. As we continue to make progress towards our refined long-term vision, the muscle that we build along the way should allow us to shape our future and uncover additional opportunities for growth and profitability. As we balance our short-term goal of returning to profitability with refining and executing our long-term vision, there remains much work to be done and we are in the early stages of our journey. I do want to emphasize that during this transitional phase, we remain steadfast in our constant commitment to our customers and to a path to profitability. On that note, I would like to express my sincerest gratitude to our dedicated employees, our partners, and stakeholders for their unwavering support and commitment to the Kirkland's Home brand. I am confident that our collective efforts will pave the way for long-term success and create value for our shareholders. With that, now I'd like to turn the call over to Mike, who will provide detailed commentary on our performance in the first quarter and our financial outlook. Mike, over to you.