Study Suggests Home Retailing Declines, Kirkland's Differs

A new PricewaterhouseCoopers/Retail Forward study Retailing 2015: New Frontiers predicts that the immediate future will continue to be rough for home furnishings and housewares retailers, but that generalization might not be universally true, and especially not in the case of Kirkland’s.

The study argues that the housing crisis will continue to hurt home retailing, which will lag a  recovery for the larger industry in 2010. Of course, the consulting firm isn’t alone in its dire predictions for the sector. Analysts are anticipating steep declines to be included in imminent financial reporting from Williams-Sonoma. Yet, in contrast, Kirkland, a bargain-oriented home furnishings retailer, is in the midst of a reversal in fortune, reporting significant gains.

The retailer posted lower net sales in the fourth quarter, after closing 36 underperforming stores in the 2008 fiscal year, but its comparable store sales gained 5.3%. Comps were up for the year as well, with the increase of 3.6% demonstrating that Kirkland’s was building momentum as the recession deepened toward the end of 2008. And the retailer didn’t get its comparable store sales gains by giving away the store — and its profits — with big sales, as net income in the fourth quarter increased to $15 million, or 76 cents per diluted share, from $1.5 million, or eight cents per diluted share, in the year-earlier period. Excluding one time charges, earnings per share in the latest complete quarter were 59 cents versus 22 cents in the same frame a year ago, a significant improvement anyway, and the company made 30 cents a share for the full year versus a 2007 loss, even with one-time charges removed.

Robert Alderson, Kirkland’s president and ceo, said the company still plans to close 35 to 40 more stores as it continues to shore up its financial position, but he noted that trends in the first quarter indicate that the company can post improving margins and earnings for the year if the economy at least stabilizes.

The PricewaterhouseCoopers/Retail Forward study argues that the collapse in the housing market will undercut home and housewares retailing as lower or even negative home equity take way what means and desire consumer might have to dress up their lifestyles. Yet, if cocooning is reemerging as a consumer trend, and sales patterns in televisions, home photo printing equipment and other domestic entertainment products suggest that’s possible, consumer may be inclined to spruce up the old living quarters a bit, if the price is right. The Kirkland’s results revive some hope that home retailing may be poised for a rebound, at least on the less pricy end of the market.