Will Kirkland's Earnings Be Enough to Uphold its Inflated Valuation?

Kirkland’s stock has enjoyed a massive surge in the past year

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Kirkland's, Inc. (NASDAQ:KIRK) is an American specialty retailer that sells home décor, furniture, textiles, accessories, and gifts. KIRK currently operates 372 stores in 35 states as well as an e-commerce website. Kirkland's stores also offer a broad selection of merchandise, including framed art, mirrors, candles, lamps, picture frames, accent rugs, garden accessories, and artificial floral products, as well as seasonal merchandise.

KIRK has experienced unfathomable growth over the past year. The equity is up over 2300% year-over-year and has now increased 4269.6% from its multi-year low of $0.56. Shares of KIRK are cooling from their March 2 record peak of $32.69, though support at the 600-day moving average has contained most of this pullback. 

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Last month, on Feb. 19, Kirkland's released its preliminary fourth-quarter results. In its press release, KIRK stated that it expects earnings per share to come in somewhere between $1.30 and $1.40. The company also expects a comparable sales increase of 1.8%, including e-commerce growth of 35.5%. It estimated sales of approximately $195.0 million compared with $209.4 million from the prior year, due to the closure of 59 stores. Kirkland’s also highlighted an estimated cash balance of $100 million with no outstanding debt at the end of 2020, and a total liquidity of $140 million. KIRK will release its fourth-quarter earnings before the market opens on Friday, March 12.

Kirkland’s has outperformed earnings expectations just once out of its four most recent earnings reports. For the fourth quarter of 2019, KIRK missed analyst estimates by a margin of $0.12 and reported an earnings per share (EPS) of -$0.53. For the second quarter of 2020, Kirkland’s decreased its EPS to -$1.05 and missed expectations by a margin of $0.34. For the third quarter of 2020, the firm posted an increase in earnings up to -$0.58 per share, but failed to meet analyst expectations by a margin of $0.08. In the company's most recent quarterly report, Kirkland’s reported an EPS of $0.82 and beat expectations by a huge margin of $1.12.

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