Home goods chain Kirkland's has warned that the potential impact of tariffs on its sales could derail its ability to continue operating its business, joining the chorus of U.S. retailers that have voiced concerns about the increased fees.
Brentwood, Tennessee-based Kirkland's, which has 314 stores in 35 states, issued the alert Thursday when it reported its fiscal fourth-quarter earnings. The retailer, which imports some goods from China, said it's taking steps to mitigate problems securing inventory but that its efforts may not succeed. In addition, "challenging macroeconomic conditions" may "further constrain consumer demand," according to the company.
"Given these uncertainties and the consequences they may have on the projected cash flow, there is substantial doubt about the company's ability to continue as a going concern for a period of at least 12 months from the date of issuance of the consolidated financial statements," Kirkland's said.
The chain is already in a financial pinch and is hoping to receive a waiver of a default with two lenders in connection with financing planned to close next week.
President Donald Trump's newly imposed tariffs have created economic uncertainty that has some companies, including retailers, lowering their guidance or pulling it. Some businesses are sounding the alarm that increased tariffs will be passed on to consumers in the form of price increases. Kirkland's appears to be one of the first retailers to suggest that tariffs may cause it permanent harm.
To alleviate its financial woes, Kirkland's said it is seeking an additional $5 million from its partner, Utah-based Beyond. Kirkland's is working with Beyond to relaunch the Bed Bath & Beyond and Buy Buy Baby brands with brick-and-mortar locations. A Kirkland's store in Nashville, Tennessee, will be converted into a "first of many" Bed Bath & Beyond Home stores, and four Kirkland's locations will become Overstock stores, Kirkland's CEO Amy Sullivan said Thursday on an earnings call. Beyond, formerly Overstock.com, owns the rights to not only its original namesake brand but Bed, Bath & Beyond and Buy Buy Baby.
Resourcing opportunities
Sullivan also addressed tariffs on the call.
"Our merchandising and sourcing teams are actively engaged in cost negotiations, resourcing opportunities and strategic price increases," she told Wall Street analysts. "Assuming that current tariffs are tempered in the near term and through the efforts we have underway with the support of our long-term vendor partners, I believe in our ability to navigate these headwinds."
The chain has reduced its sourcing exposure to China to about 70% from more than 90% a few years ago, according to Sullivan. Kirkland's is looking to alternative countries with lower tariffs, such as India, Vietnam and Cambodia, to secure merchandise, she said.
Sullivan provided more details on Kirkland's partnership and opening stores with Beyond, plans announced in October. Kirkland's and Beyond are working with brokerage JLL to create a vision for the new iterations of not only Bed Bath & Beyond but Buy Buy Baby, she said.
"These [Bed Bath & Beyond] locations will have a differentiated assortment from our current Kirkland's Home stores as we expand bedroom and bathroom and reduce slower turning categories such as wall and lighting," Sullivan said. "We expect these stores to deliver more consistent foot traffic and improved inventory turns, driving increased store productivity compared to our current Kirkland's home location. Bed Bath & Beyond's Home blends the category expertise we have in-house with the power of the iconic name and is well positioned to compete at a national level as we deliver style and value for every corner of her home."
Both the Bed Bath & Beyond and Buy Buy Baby chains were liquidated in 2023 as part of a bankruptcy, with Beyond acquiring their intellectual properties.
Treasure hunt deals
As for the Overstock stores, Kirkland's sees a tremendous opportunity in that name, according to Sullivan.
She described Overstock "as a true off-price brand filled with a treasure hunt of deals from our family of brands, excess inventory from our best vendor partners and a more profitable solution for liquidating returns."
Kirkland's tested a similar concept, called the Attic, "and given the incremental lift we saw, we believe a fully dedicated Overstock store should deliver at least two times the revenue of a current Kirkland's Home store," Sullivan said.
On an earnings call earlier this week, Beyond CEO Marcus Lemonis said his company had authorized one Buy Buy Baby to be opened and tested, most likely in Nashville. That launch and grand opening will be May 8, according to Lemonis.
Kirkland's didn't respond to an email from CoStar News seeking comment Thursday on Buy Baby Baby and the exact Nashville Kirkland's store that will be converted into a Bed Bath & Beyond. Beyond didn't respond to an email, either.
Because of the current economic uncertainty, Kirkland's declined to provide guidance.
Its net sales in the fourth quarter were $148.9 million, compared to $165.9 million in the prior-year period. The decrease was driven by the extra week in the prior-year quarter fiscal calendar, a 4% decline in store count and a decline in e-commerce sales, partially offset by growth in comparable store sales, according to Kirkland's.