Good morning, everyone, and thank you for participating in today's conference call to discuss Kirkland's financial results for the third quarter ended August 3, 2024. Joining us today are Kirkland's 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 and good morning. 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 kirklands.com. Now, I will turn the call over to Kirkland's CEO, Amy Sullivan. Amy?

Thank you, Caitlin, and good morning, everyone. The third quarter marked a significant turning point for Kirkland's as we entered into a strategic partnership with Beyond that allowed us to retire expensive debt, strengthen our balance sheet and begin to position our company for growth. This partnership not only provides us with additional capital to continue progressing on our Kirkland's Home initiatives, but enables new growth opportunities as we work together to revitalize the Bed Bath & Beyond brand. In addition to this important milestone, during the quarter, we anniversaried the strategic shift in our Kirkland's Home brand that we began to implement in September of last year. Going forward, our results will be much more comparable to prior year periods as we continue the brand revitalization. Before I share more on our strategic initiatives, let me review a few highlights from the quarter. I am very pleased with our team's ability to deliver our fourth consecutive quarter of positive comparable store sales growth of 1.6%, driven by positive traffic and conversion despite a significant headwind from hurricanes Helene and Milton. In line with prior quarter trends, the strength in our store performance continued to be offset by declines in our e-commerce channel, resulting in a total comparable sales decline of 3% for the period. With respect to profitability, we delivered a year-over-year $3.7 million improvement in adjusted EBITDA, resulting in a return to positive adjusted EBITDA for the quarter. While we have continued to see our customer be choiceful in her spend, which has increased promotional activity across the industry, we were pleased to see a 6% increase in transactions and 10% increase in units sold, driven by continued positive momentum in seasonally relevant decor, such as holiday, floral, and gifts. Our overall third-quarter performance is a great example…

Thank you, Amy, and good morning, everybody. For the third quarter, net sales were $114.4 million versus $116.4 million in the prior year quarter. As a reminder, we had anticipated that the calendar shift associated with last year's 53-week year would benefit total sales dollars in the third quarter as a smaller week at the beginning of the quarter was replaced by a larger week pulled into the end of the quarter. This shift benefited sales by approximately $3 million in the third quarter. In addition to this shift, the total sales comparison incorporated the 4% decline in average store count compared to the prior year quarter, and a comparable sales decrease of 3% for the quarter. The decrease in comparable sales, which is calculated on a like-for-like basis by shifting the prior year NRF calendar by one week, was driven by declines in the consolidated average ticket and e-commerce conversion, partially offset by an increase in consolidated traffic and store conversion. We estimate that hurricanes Helene and Milton negatively impacted our comparable sales performance by approximately 100 basis points. For the quarter, comparable store sales increased 1.6%, inclusive of the disruption from the hurricanes which impacted about 20% of our store base in some fashion. With respect to our e-commerce business, sales declined 14.9% compared to the prior year period, offsetting the positive results in our store channel. E-commerce accounted for 24% of total sales in the quarter, down from 28% in the prior year quarter. Breaking down sales within the quarter, comps were down 3% in August, down 1.3% in September, and down 5.2% in October. October reflected a more difficult year-over-year comparison and included the impact of the hurricanes and the inventory flow adjustments that Amy discussed. From a merchandise perspective, we saw increases versus the prior…

Thank you, Mike. We are proud of the results we have continued to deliver throughout this year despite the challenges we have faced. This year is a transformative year for Kirkland’s. We entered the year as a single banner retailer in the midst of a turnaround and we are exiting the year as a dual brand retailer with significantly more growth opportunities along with an improved balance sheet and ongoing traction against our initiatives. As we look ahead to 2025, we are excited to unlock the potential of our partnership with Beyond as we revitalize the Bed Bath & Beyond brand, further strengthen the Kirkland’s Home Foundation, and begin to reinvest in areas like technology and marketing. Before I close, I want to thank our teams. None of our accomplishments would be possible without our team members who show up focused on our customer every day. Their dedication to the art and science of retail is crucial in delivering the experience our customers love. We are excited by the opportunities for growth and are committed to delivering value to our shareholders. That is our focus now and will continue to be in 2025 and beyond. That concludes our prepared remarks. Operator, we're now ready to take Q&A.

[Operator Instructions] The first question comes from Jeremy Hamblin with Craig-Hallum Capital Group. Please go ahead.

Thanks for taking the questions, and congrats on the strategic partnership. I wanted to start by coming back to the commentary around trends and see if we can get a little more color in terms of what you're seeing. You noted a little bit softer results here in November, but wanted to understand if you could help us with kind of magnitude and then also kind of the split that you're expecting in terms of e-commerce performance, which, it's lapping kind of similar compares in Q4 versus Q3 versus your retail store sales, which saw a pretty meaningful improvement last year and is clearly a tougher compare.

Thanks, Jeremy. I'll start and then I'll let Mike give some additional color. So from an overall start to the season perspective, as you know, Q4 is our holiday season. And so when you take into account the calendar shift, we're really managing to this nine-week spread between November and December. So there's a lot of noise in the month of November in terms of how the calendar shift plays out. Mike alluded in his part of the script that if you use history as a comparison and look at 2019 and the rate of sales that we expect to have in at this point in the season, it still gives us optimism that November and December combined will be what we need it to be. So we're really looking into -- the next two weeks are really important for us. We have a huge customer appreciation event going on right now and as we wind into December, we believe those nine weeks combined will shake out.

And, Jeremy, in terms of the compares, I think we continue to see more momentum in the store side of the business. I think that will continue into the fourth quarter notwithstanding the tougher comps you called out as it relates to stores. That's just the trend we've been on. We've been seeing the traffic gains there, the conversion gains there, and that continues.

Got it. And then shifting gears here to talking about the Beyond partnership. As we head into 2025, it sounds like, that really starts in earnest in Q1. And wanted to get a sense for how you think that's going to evolve, particularly your e-commerce business and the potential there, there's obviously some aspects to that agreement in which you're paying fees and incentive fees for success there, but also wanted to understand how it might impact your marketing budget and how those costs may be shared across the two parties.

Sure. So from an e-commerce perspective, we, as you know, throughout this past year have been really focused on evaluating our technology. We've gone through a pretty robust RFP process to start to identify the replatforming choices that we need to make. Given that our inherent strength here is brick and mortar and theirs is e-commerce, we've paused just to bring their expertise to the table with us as we make those final decisions on the re-platform. So when I think about how we leverage them as we cross into the new year, it would really be taking their guidance in terms of those next steps in our decision for building out our roadmap and leaning into them as we think about are there other partners or other players in the technology space that we should be evaluating as we look at our dated tech stack and negotiate alongside of them from an economy of scale perspective just to open up more options to make sure that when we do invest in technology we've made the best decision for the long haul. So we're actively working through that right now. We expect to make our [Technical Difficulty] platform decision by the end of this calendar year and then other components of technology that we think enhance the total business, we will continue to have those conversations as we move into the start of the new year. And then from a marketing perspective, I would say it's sort of twofold. And so obviously our goal, both Kirkland's and beyond, is to get a benefit of pooling our customer data and how can we not only learn customer shopping behavior by having the data pooled together, but how can we also share in a potential future unified loyalty program, unified credit card program. And so we are in the very early phases of that and obviously working through sharing that data, ensuring that we're giving our customers the opportunity to opt into that and working with our legal teams on all the privacy laws. But we definitely believe that there's significant upside when you think about the opportunity for Kirkland to get new customers into the file at a much more efficient cost by sharing in the much larger pool of customers that Beyond has across its multitude of brands.

And, Jeremy, one thing to add to that, just even with the fees related to the collaboration and the fees related to the incentive on the e-commerce side, when you look at it all together from where we were, cost of debt if you will, versus where we are, it's neutral and it comes with these benefits. So we continue to be pleased that that's the case going into 2025.

Let me see if I can get a little bit more granular there. In terms of thinking about the costs, as you're getting into a venture like this and kind of taking your respective customer bases and helping them to understand the changes that are happening here, would you expect greater investment to be made by Kirkland's in kind of getting this kickstarted next year?

We definitely would in terms of the store aspect of this. I mean, we're going to operate these stores with our people, with our real estate efforts, our construction. So as we look at that five stores, the kind of plan for the pilot next year, that will be an investment from us, but we're getting that additional capital as we close this with the shareholder meeting coming up here on December 23rd. That's when the final $8 million comes through connected to the entire transaction. And that will provide us that -- it's not a huge amount to get into these five stores, but it does provide us the ability to do that and some flexibility to do some other things across the business.

Great. And then just one other quick one here from me. In terms of what you're seeing from a kind of promotional environment out there, I think that the category as a whole has probably been somewhat neutral year-over-year but wanted to get your insight in terms of what you're seeing from your closest competitors and whether or not there are particular categories. You noted kind of the disparity in performance among categories, but whether or not you're seeing some more aggressive promos in particular categories.

Yeah, I would say overall we've been able to control sort of what we expected the promotional cadence to be. I would say it's more about consistency of promo and ensuring that there's sort of always a new fresh deal for our customer to keep traffic and conversion where we need it to be from an ongoing perspective. There have been parts of our business in the more seasonally relevant decor side of things and we specifically mentioned on this call Halloween and harvest where we were able to get better reg price selling at the beginning of the season and close out that season a little better than we had in prior years. If you think about the higher ticket categories, though, I would say it is just sort of a continuation of what we've seen in terms of the pressure on those high ticket goods. The good news for us is we have been very consistently focused on bringing in value engineered product within the high ticket category. So, as we move into the future months, we think that will start to balance. But it's really just about getting that consistency of a value message and a promotional message out there to focus on traffic.

Got it. All right. Thanks for taking the questions and best wishes.

Thank you.

Thank you, Jeremy.

This concludes our question-and-answer session. I would like to turn the conference back over to Amy Sullivan for any closing remarks.

Thank you all for joining us today. As a reminder, we are having our upcoming shareholder vote on December 23rd, which assuming a positive outcome, will solidify the full investment from Beyond, resulting in $8 million of additional liquidity by year end. We look forward to speaking with you again on our next earnings call and we hope that everyone has a happy and healthy holiday season.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.