Kirkland’s, Inc. (NASDAQ:KIRK) Q1 2023 Earnings Call Transcript

And even if you look at 40% of the products being under $20 and speaking that value message, we believe those messages will drive traffic in both channels. And we also believe that we will surprise and delight our customer when they come into the store and see that they can buy gifting and decorating accessories, et cetera, at a price they can afford to enjoy their holidays. And so the pivot of that and the movement of the team and the speed by which they’ve been able to move is pretty impressive and I think that we’re well positioned for the back half. Amy, do you want to give a little bit more color around?

Amy Sullivan: John, I know you’ve followed us for a long time, so you’re really familiar with sort of our historic mixes in the back half specifically in the holiday period. And so I think it will feel very familiar to you in terms of category mix and really focused on sort of those three key time frames of the holiday season, if you think about decorating, entertaining and gifting. And we have a long history in that, that has proven to be very successful for us in the past. Over the past few years, I think the penetration that we’ve had in the furniture category has overshadowed some of that. We haven’t walked away from that, but we need to get back to those historic levels of what the holiday business means to us in the back half of the year.

So as we move into this year specifically, you’ll feel the broader assortment in holiday, better depth in holiday items and then a heavier focus as Ann and Mike both mentioned in the items under $20, representing 40% of our assortment, which is also comparable to some of our best Q4s in the past. Furniture, as Ann mentioned, we’ve learned a ton about. It’s not going away for us. But I think the breadth of the assortment got too wide. And so we are laser-focused on staying in stock and the proven items within furniture that work because we do believe it’s a foundation. If you think about our store format, our customer comes to us for inspiration and how she puts the looks together and decorates her room. So it’s important to us, but we want to flip back to ensuring that we’re heavily focused on how she decorates, and celebrate sort of every moment throughout the year, specifically focused on Q4 right now.

John Lawrence: Great. Thanks for that. And then, secondly, you’ve learned a lot over the last few years about this direct sourcing. Has the furniture direct sourcing spilled over some other — where are the learnings that you’ve picked up from that? And how does that go forward?

Amy Sullivan: Sure. I’ll take that one. It’s Amy again. So our overall direct sourcing penetration, as you’ve heard us mention before, it’s close to half of our business. And it’s really pretty evenly spread across most of our categories. And so it definitely started heavily in more of our everyday home furnishings if you think about textiles and furniture. But even this year’s holiday assortment has a pretty heavy penetration in direct importing And so I would say our biggest learning and takeaway from that over the past few years has been, obviously, some improved IMU and margin out of the gate, better control of quality, better control of design and more unique products to Kirkland’s. And so we will continue to leverage that.