JACKSON, TN-Decreased customer traffic at its mall stores and heavy discounting on seasonal items caused fourth-quarter profits to drop 13% at home décor retailer Kirkland’s, which forecast wider losses for the first quarter of 2006 as well.

Company officials said a lack of store traffic, particularly in its mall stores, hurt sales and brought in just $10.1 million, or 51 cents per share, during the quarter ending Jan. 28. That figure was $1.5 million less than the prior year’s profit of $11.6 million, or 59 cents per share. Revenue during the period, meanwhile, rose 6% to $153.4 million from $144.3 million a year earlier.

For the full year, the Jackson,TN-based retailer said it expects a 25 cent to 35 cent per share profit on sales of between $465 million and $480 million. Same-store sales for the year are expected to range from a 2% increase to a 2% loss, according to company officials.Robert E. Alderson, Kirkland’s chairman and chief executive officer, said although fourth-quarter earnings were in line with revised estimates issued earlier this month, curtailed customer traffic and heavier markdowns took its toll on the bottom line. Even strong category sales were not enough to offset what Alderson called “a disappointing season.”

“Current business conditions led us to a cautious sales outlook, especially for the first half of the year,” he said.

First-quarter projections expect losses of between 14 cents and 17 cents per share, 4 cents to 7 cents higher than the 9 cents in first quarter losses for 2005. Sales for the first quarter are projected to hit the $90 million to $93 million mark with same store-sales expected to slip between 4% and 7%, the company said.

Alderson said the company, which operates approximately 335 stores in 37 states, plans to transition to more non-mall stores during the course of the year to capitalize on the success of those stores, which account for a much larger share of store level profits. By the end of fiscal 2006, he said, Kirkland should have more off-mall than mall-based stores for the first time in the firm’s 40-year history.

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