JACKSON, TN-As a result of the devastation caused by hurricanes Katrina, Rita, and Wilma, home décor retailer Kirkland’s experienced a net loss of approximately $1.3 million, including approximately 70 basis points in comparable store sales, during its third quarter ended Oct. 29.

“The third quarter was a challenging one due to the severity and frequency of hurricanes in several of our key markets,” said Jack Lewis, Kirkland’s president and CEO, while disclosing the company’s third quarter earnings Friday.

Overall, the company reported a net loss of $2.5 million, or 13 cents per diluted share, for the quarter compared with a net loss of $3 million, or 16 cents per diluted share, for the prior-year period. Net sales increased 8.9% to $90.2 million compared with $82.8 million the same year-ago period. Comparable store sales for the third quarter of 2005 decreased 3.4% compared with a 13.5% decrease for the third quarter of fiscal 2004.

During the company’s webcast Lewis said a decline in customer traffic in mall and off-mall locations was a primary contributor to the comp-store decrease. However, Lewis noted that off-mall locations were more successful than mall locations.

Overall sales of off-mall locations posted an increase of 1% compared to a comp-store decrease of 4.7% in mall locations, Lewis said. The average sales volume for off-mall units was also 26% higher than mall-located stores. “The new stores class of 2004, of which was 80% off-mall locations, and the 2005 store class, which was exclusively off-mall, had encouraging sales results,” Lewis told investors.

Kirkland’s issued guidance for the fourth quarter ending Jan. 28, 2006, of net income of 57 cents to 65 cents per diluted share. Net sales are expected to be $152 million to $157 million, with a comparable store sales decrease of 1% to 4% compared with net sales of $144.3 million and a comparable store sales decrease of 4.2% in the prior-year period.

Kirkland execs expect to report earnings for fiscal 2005 in a range of 6 cents to 14 cents per diluted share, down from earlier expectations of 12 cents to 20 cents per diluted share. The company is also expecting net sales of approximately $414 million to $419 million, and a comparable store sales decrease of 5% to 7%.

“Due to the lack of sales momentum in October and to date in November, as well as macroeconomic issues such as higher heating costs this winter, we still think it is prudent to take a slightly more conservative outlook for the fourth quarter than we had originally anticipated,” Lewis said. By year’s end, the company expects to have opened 59 new stores and close 32 stores, or a net increase of 27 stores. During the third quarter, the company opened 26 new off-mall stores and closed 5 mall stores, ending the quarter at 334 stores. Originally focused in the Southeast, the company now operates 338 stores in 37 states.

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