Down 21% Already in 2022, Kirkland's Preps for Earnings Call

The stock landed on the Short Sale Restricted list today

Mar 16, 2022 at 10:57 AM
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Kirkland's, Inc. (NASDAQ:KIRK) is heading into the earnings confessional before the open tomorrow, March 17, to discuss financial results for the fourth quarter and full year of 2022. In the last quarterly earnings report, KIRK reported earnings of $0.51, just missing analysts' estimates. Analysts now expect the retail company’s EPS (earnings per share) coming in at an elevated $0.64 for the upcoming report.

The stock has a history of outsized post-earnings swings, specifically during the last two years. During its last report in December, KIRK fell 24.8%, though it also managed a next-day pop of 16.8% last September, as well as a 19.3% return after its December 2020 report. During these last eight sessions, the stock was higher half the time, averaging a post-earnings move of 12.2%, regardless of direction. This time around, the options pits are pricing in an even bigger 23.3% swing. 

Speaking of, put traders are picking up the pace ahead of the event. While overall volume is still muted, the 412 puts exchanged so far today represent three times the intraday average. The most popular is the April 12.50 put, followed distantly by the 10 put in the same monthly series, with positions being sold at both. 

The equity is up 4.8% at $11.68 today, and like a lot of the broader market, it's just a few sessions removed from a nearly two-year low just above the $10 mark. While the 20-day moving average has provided more immediate pressure on the charts, the stock's 60-day moving average snuffed out a rally attempt in mid-February, sending KIRK to the 21% year-to-date deficit it now sports. 

kirk march 16

It's worth noting that KIRK is on the Short Sale Restricted (SSR) list today, though prior to today's session these bears were building their positions. Short interest rose 16.3% in the last two reporting periods, and makes up a healthy 15.9% of the stock's available float, or nearly seven days' worth of pent-up buying power. 

From a fundamental perspective, Kirkland’s stock offers a very attractive valuation, trading at a forward price-earnings ratio of 7.00 and a price-sales ratio of 0.38. However, other key areas of the retailer’s fundamentals provide very little security and stability. For example, Kirkland’s has $162 million in total debt on their balance sheet and only $26.5 million in cash. In addition, KIRK's revenues experienced a 16% decline between fiscal 2019 and fiscal 2021. The retail name also reported $53 million in net losses for fiscal 2020, which was a $57 million decrease compared to fiscal 2019.

Nonetheless, Kirkland’s revenues and net income have grown 6% and 84%, respectively, since fiscal 2021. The specialty retailer is also estimated to see a 22.2% increase in earnings and a 0.5% increase in revenues for fiscal 2023, placing it in a decent position for the near future. Overall, KIRK has great upside potential if fears begin to ease in the market, but there is also a high risk of Kirkland's stock continuing to sink in the short-term.


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