Good morning, everyone, and thank you for participating in today’s conference call to discuss Kirkland’s Financial Results for the Second Quarter Ended August 3, 2024. Joining us today are Kirkland Home CEO, Amy Sullivan, EVP and CFO Mike Madden, and the company’s external Director of Investor Relations, Caitlin Churchill. Following their remarks, we’ll open the call for your questions. Before we go further, I would like to turn the call over to Ms. Churchill as she 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. Caitlin, please go ahead.

Thank you. 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 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 forecasted results. Those risks and uncertainties are more fully described in Kirkland’s filings with the Securities and Exchange Commission. 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.com. Now I would like to turn the call over to Kirkland CEO, Amy Sullivan. Amy?

Thank you, Caitlin, and good morning, everyone. I will begin today’s discussion with a review of highlights from our second quarter performance and will then provide an update on the progress we are making against our strategic initiatives, before turning the call over to Mike to review our financial results in more detail. Our second quarter comparable sales performance reflects the sequential improvement from the first quarter as we continue re-engaging our core customer, re-focusing our product assortment, and strengthening our omnichannel capabilities. For the quarter, total comparable sales declined 1.7%, reflecting a 1.8% increase in comparable store sales growth which was offset by a 10.6% sales decline in ecommerce. While we continued to see year-over-year declines in average ticket given our ongoing work to rebalance our assortment and reduce penetration in higher ticket, slower turning categories, overall units sold were up approximately 20% compared to last year. With respect to profitability, adjusted EBITDA improved $3.3 million compared to last year as we drove gross margin expansion despite increased promotional activity by maintaining a disciplined approach to cost and expense management. As a reminder, in May, we executed a number of cost savings initiatives to improve our profitability and liquidity. Through these actions, we continue to expect to deliver $6 million in expense savings by the end of fiscal 2024. While the second quarter is historically our smallest quarter from a sales and profit perspective, it is an important transition as we prepare for our peak season. Within the quarter, we strategically took advantage of key holiday shopping events such as Memorial Day and Fourth of July. We also reintroduced seasonally relevant micro-trend collections such as Mother’s Day gifting and back to campus décor, improving our consumer relevance within the summer months. Our Halloween and harvest assortments arrived in stores…

Thank you Amy, and good morning everybody. As Amy reviewed, we continue to be pleased with the ongoing progress against our initiatives, as reflected in the positive comparable sales growth we delivered in our store channel for the period and the year-over-year improvement we delivered in adjusted EBITDA. Turning to our results in more detail, for the second quarter, net sales were $86.3 million versus $89.5 million in the prior year quarter. The average store count was down 4.4% compared to the prior year quarter, and comparable sales decreased 1.7% for the quarter. The decrease in comparable sales was driven by a decline in the average ticket and ecommerce traffic, offset partly by an increase in store traffic and omnichannel conversion. Breaking down sales within the quarter, comps were down 0.2% in May, up 0.5% in June, and down 5.3% in July. The month of July was impacted by tougher ecommerce comparisons and POS disruptions related to an IT outage with one of our vendors. We drove positive comparable store sales of 1.8% in the quarter, driven by relative strength in June and July. With respect to our ecommerce business, sales declined 10.6% compared to the prior year period, offsetting the positive results in our store channel. The sequential improvement in trends in our ecommerce channel from Q1 was largely driven by easier year-over-year comparisons at the start of the period as the channel continues to face headwinds with respect to its higher ticket categories. Ecommerce accounted for 25% of total sales in the quarter, down from 27% in the prior year quarter. From a merchandise perspective, we saw increases versus the prior year in holiday, gift, floral, decorative accessories and fragrance, reflecting our shift in emphasis to faster turning, lower price point items; however, these increases were not enough…

We will now begin the question-and-answer session. [Operator instructions] The first question today comes from Jeremy Hamblin with Craig-Hallum Capital Group. Please go ahead.

Thanks and congrats on the improved results. I wanted to just get started here in talking about trends. It sounds like you’re pleased with the initial start. I wanted to see if you might be able to give a little bit more clarity on that in terms of whether or not you’re comping positive quarter-to-date, how compares stack up for the remainder of the quarter, and then just in terms of this split between how your ecomm business is doing versus your retail store, if you kind of expect that to continue. I know that the compares are actually a little bit easier--or I’m sorry, a little bit tougher in Q3 on your ecomm business versus what you saw in Q2.

Hey, Jeremy, I’ll start and then Mike can jump in with some more color on that. From August, or a quarter-to-date perspective, we’re seeing a similar comp trend to Q2 and finished the month really strong. So as you know, from following us over time, as we build into our true fall and holiday season, that’s really when the strength of the brand starts to accelerate. And so, as I’ve shared, we’re really pleased with Halloween in particular. Oftentimes, that is an indicator of how Christmas will perform. Christmas is actually arriving in stores, the first wave of it this week, so we continue to feel optimistic about the back half. I would certainly say the consumer environment is requiring more promotion just to sort of incentivize her, and again particularly in those higher-ticket categories. So I don’t necessarily see that part of it improving overnight, but the penetration of holiday and gift and textiles, the areas where we’re really winning and are historically strong categories for us, become even more meaningful as we move into the back half. So that’s sort of where we’re thinking about the balance of the year. And then in terms of kind of brick and mortar versus ecommerce, ecommerce, the biggest part of our miss is really coming from the drop ship business, which I think as we’ve shared in the past, is very heavy in furniture, wall, rug, those high-ticket categories. And so we’ve seen that we can definitely stimulate sales with discounts, and we will be surgical about that to balance driving demand but also making sure that those sales are as profitable as they can be. But I would say, I expect that challenge to continue in the ecomm channel a little further into this year. The things that we can control, we will control, and then as we’ve shared, as we think about sort of next year and the future, I think there’s some incremental upside we can think about as we get closer to a re-platform.

Got it. Good color. And then in terms of just following up on the comment about the consumer and she’s requiring a bit more promotion and so forth, how should we be thinking about gross margin as we look into the back half of the year? You guys have had improved gross margin year-over-year both in Q1 and Q2, and wanted to get a sense for whether or not you were expecting that same type of momentum to continue here in Q3 and Q4 as well.

Yes, Jeremy, yes, I think those are the call-outs that we made related to the promotional environment, we expect that to continue. So that’s a little pressure on margin, and then I also called out the freight. Some of the higher-freight costs that we endured on the inbound in second quarter, those goods will be selling through in the back half, so that will create some pressure as well. Having said that, we still feel like we’ve got opportunity on the merchandise margin and we certainly have opportunity on all the other cost line items that we’ve experienced solid reductions year-to-date, so that our gross profit, we still see the potential to expand that in the back half. Aside from a little bit more promotional pressure and some freight pressure, we think we can overcome that with all the other things that we’ve put into place this year and what we’ve experienced in the first half.

Just to clarify, in terms of seeing gross margin up in the second half of 2024, are you more likely to see gross margin up in Q3 or Q4?

I would say Q3 on that, just because -- and I’ve called out the calendar shift a bit in my prepared remarks. We get more sales in the third quarter this year given that shift - you’re taking a week from the early, or that November-ish type week and you’re replacing it with an earlier week in the third quarter. So that’s going to create some more leverage on some of the more fixed costs, so I see more opportunity in the third quarter than the fourth. But I think we have opportunities in both, I would just weigh the third a little bit heavier than the fourth.

Got it. Thanks for the color. Good luck, and I’ll hop out of the queue.

Thank you.

The next question comes from John Lawrence with Benchmark. Please go ahead.

Yes, good morning. Thanks for the time, guys.

Hey, John.

Could you talk about -- we’ve been in some stores lately, and it seems like -- remind us a little bit, did Halloween get into the stores just a little earlier this year?

Yes, you’ll probably recall from last year, we had a really strong Halloween season last year as well, and it’s a big trend in the market overall. So we definitely brought it in about a week early this year. I would say there’s opportunity to maybe even accelerate that further as we move into future years, but we definitely got an early benefit of a set date as well as it was really strong right out of the gate and got some really good full price selling out of that set.

So it sort of appeared from store visits that traffic was up during that period of time, whether they were just window shopping, et cetera., but it seemed like a lot of transactions for that early Halloween stuff. And can you give a sense of -- you talk about 39% reactivation rates. Can you talk about the fleet of stores? And if you’re doing positive comps, can you talk about maybe what percentage of the fleet is positive at this point?

Yes, on that part, John, we are slightly positive in the stores year-to-date, and we were in the second quarter. We’re seeing positive traffic pretty much across the board in our store locations. I think it’s, as it always is, it’s a mix of some are down and some are up, but I think we called out geographically we’re seeing consistent performance across the chain. And so it’s pretty -- if we’re slightly positive, we’re kind of slightly positive in most places, I would say. There’s always outliers, but there’s nothing really to call out that is different.

So in your base region, you might have mentioned and I missed it, but what’s the plan on maybe some of these new stores in your trade area that you think could be really successful? Has anything started there, or still waiting for capital for that?

Well, we’re largely waiting for some capital there to kind of give us the room we need to do that more aggressively, but we have identified a lot of locations that we know we would go to. We do have a couple that are actively being pursued, so stay tuned for more on that; but we’re excited about the ability to get back and build some stores. I mean, I think we’re missing some customers in some key markets, and we’re anxious to get back into those markets.

Last question from me, Amy, when you look at--the Halloween set looks a little different, some new items. I assume that same type of freshness goes to the fourth quarter with holiday stuff coming in?

Yes, I would say we have a good amount of newness in the holiday assortment, as well as if you’ll recall, last year was the first time we re-introduced gift in Q4, and so the success that we saw in that, we really doubled down on the investment in that category as well, so the customer will feel significant newness particularly as we move October to December, which I think will give us continued momentum on positive traffic, improving inventory turns, that there is a lot of new arriving, as I said before, starting this week throughout the balance of the fall holiday season.

Great, thanks guys. Good luck in second half.

Thank you.

Thanks John.

This concludes our question and answer session and concludes the conference call. Thank you for attending today’s presentation. You may now disconnect.