Kirkland's, Inc. (KIRK) second-quarter 2012 loss of $0.11 per share widened than the prior-year loss of $0.02 due to higher promotional activity and softer-than-expected sales. Sales also missed the Zacks Consensus Estimate. Margins were crippled due to a high rate of inflation and fuel cost.
The company lowered its profit and sales guidance for fiscal 2012. It also expects same-store sales to remain flat or decline in the coming quarters. Although the company has undertaken some reformative measures like new marketing strategies and technological enhancements, we are concerned by the company's lack of exposure outside the U.S.
We maintain an Underperform rating on the stock. Our target price of $9.00 is based on a price-to-book multiple of 1.5x.
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