Ladies and gentlemen, thank you for standing by. Welcome to the Kirkland's, Inc. fourth quarter conference call. During the presentation, all parties will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. (Operator Instructions). As a reminder, this conference is being recorded today, Thursday, March 13, 2014. I would now like to turn the conference over to Tripp Sullivan with Corporate Communications. Please go ahead, sir.

Thank you. Good morning, and welcome to this Kirkland's, Inc. conference call to review the company's results for the fourth quarter of fiscal 2013. On the call this morning are Robert Alderson, President and Chief Executive Officer and Mike Madden, Senior Vice President and Chief Financial Officer. The results, as well as notice of the accessibility of this conference call on a listen-only basis over the Internet were released earlier this morning in a press release that has been covered by the financial media. Except for historical information discussed during this conference call, the statements made by company management are forward-looking and made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause Kirkland's actual results in future periods to differ materially from forecasted results. Those risks and uncertainties are more fully described in Kirkland's filings with the Securities and Exchange Commission, including the company's annual report on Form 10-K filed on April 18, 2013. With that said, I will turn the call over to Mike for a review of the financial results. Mike?

Thanks, Tripp, and good morning, everybody. As we reported this morning, net sales for the fourth quarter were $156.1 million, comparable store sales were flat and net income was $0.69 per diluted share. Drilling down to the details of these results for a few moments, the extra week in last year's fourth quarter calendar accounted for approximately $8 million in sales. Excluding that week, total sales would have been up 0.8%. Of the flat comparable store sales results, brick-and-mortar sales were down 1.3%, driven by a 4% decline in transactions, partially offset by a 3% increase in the average ticket. The decline in transactions was due to a 7% decrease in traffic, partly offset by a 3% increase in the conversion rate. The increase in the average ticket was driven by an increase in the number of items per transaction offset partially by a decline in the average unit retail price. E-commerce sales were $6.9 million for the quarter, a 38% increase over the prior-year quarter on a 13 week basis. Adverse weather conditions during the quarter had a significant impact on traffic and sales. During the fourth quarter and primarily in December or January, we had 83 store days completely closed and 355 store days delayed or closed early due to the weather. This level of impact likely had at least 2% impact on comparable store sales. From a geographic standpoint, sales results were mixed largely depending on the impact of the severe winter weather. We had strong performance in the state of Florida, with almost a 6% comp increase but the areas hit hardest by the weather, the Southern Plains, Midwest and Northeast as well as portions of the Deep South experienced traffic and comp sales declines. Merchandise category is experiencing strong results versus the prior year were…

Thanks, Mike. Fourth quarter retail results are by now familiar and well-documented as most retailers have reported sales and/or earnings., Despite a record-breaking Black Friday weekend and a strong Cyber Monday, Kirkland's wasn't immune to the prevailing weather conditions and severe weather generated traffic affects on key weekend days into critical December and January selling season and already compressed Christmas selling season and additional weather impacts in February and early March. As with many retailers, Kirkland's saw increase or transfer of sales to its Internet channel but it ultimately wasn't enough to offset these impacts. There were some important silver linings to the quarter. The early sales and margin strength and customer embrace of the seasonal offering were encouraging and instructive for future periods. On days and weeks when we were not weather affected, we largely experienced on plan traffic and sales. We continued our year-long trends of increases in the average ticket conversion and merchandise margin suggested of an improved and accepted product assortment. Our Internet sales increased nicely over the prior-year quarter to about 5% of total sales and contributed to comparable sales increases supporting gross margin results and were profitable. Early first quarter 2014 sales results support the thesis that Q4 was somewhat of an anomaly produced by some of the worst retail traffic and winter weather in recent memory. When we have had the traffic thus far in the first quarter, we have consistently delivered positive comparable sales. Such results further suggest merchandise offering is positively resonating with customers in the first quarter. We continue to believe we are on target with lifestyle and trend with the marketplace and our customers and our sourcing of new and unique items and sharp pricing continue to present a compelling value proposition to our largely middle income shopper who…

Thank you. (Operator Instructions). Our first question comes from the line of Brad Thomas with KeyBanc Capital Markets. Please proceed.

Hi, guys. This is actually Jason Campbell from KeyBanc. How are you doing?

Hi, Jason.

I guess, I wanted to first touch on the systems. I know Robert had said that a lot of this is being rolled out or implemented in 2014. If you guys can walk through what's benefiting 2013 already? What's really going to start ramping up in 2014? Then what's the more longer term, 2015, 2016 stuff you are working on?

Okay, Jason. I will take that. Just to retrace a bit, we implemented the foundational capabilities of our Oracle merchandising management system in the fall of 2012. So the base packages has been in place since then and there are aspects of that we are benefiting from now. It's just a different hierarchy, a different way of managing our basic, our core items that we have rolled out. So there is some benefits that stem from that foundational implementation. Throughout 2013, we added capabilities in planning, allocation, replenishment and assortment planning and item planning that have been turned on throughout the year in phases, primarily in the later part of the year. So I think you look ahead and you see for that full planning suite to be working together with the foundational system, the first time we will really have that in place is this fall of 2014, a complete plan that comes out of that capability. Then to mention the other things that Robert mentioned in his comments are our future items that we would see a value in, such as markdown optimization, pricing optimization, promotional tools that helped the effectiveness of that planning. We haven't really announced how we are going to stage that end, but those are additional capabilities that we see that are appropriate for us and what we are trying to do.

And then I think we all realize that there's lot of margin benefits. Do you guys have any presumably better merchandising also benefit sales, what part of your sales guidance is linked to these systems in just having out better product in the store? And what is the sales opportunity for the systems?

Well, I mean you are right. assistance It comes in both sales and margin because to the extent you have the right products in place at the stores and at the right time you are going to sellthrough faster. Your turns are going to go up. And your margins are going to benefit. So it comes from all of those areas and our guidance would assume some of that where we have seen success. For example, in basic in-stock positions on core items, that's a component of how we have built the guidance. We are seen good trends in merchandise margin right now, which we believe some of that is tied to this. As you get further out, you get to some more specific things like tailored store inventories and how that is built up, and that's when really good payback comes, as well as something like markdown optimization, which is really a quick payback. But it was very important for us to get these foundational things in place. A lot of our process has changed as result of the system implementation and that takes some time to absorb as an organization like us.

And then lastly, by our calculation you guys are approaching that peak merchandise margin. Do you have any thought of what's the runway here, now that you are using these systems here? Can you get up closer to 60% or what's the top-end then, right now?

Well, our previous peak, and I spoke to the margin in my comments of being 54.3% in the fourth quarter. So on that metric, for a full year, our previous peak was around 56%. So we are not there yet. I think, first things first, we are trying to get back to that level and some of these systems will help. Also better process, better organization and people and all the things that go with it helped too. It's not just the system, but 60% is something that is a little more longer range and I think would involve a little bit more than just systems improvements but it's something that we know we would work toward over a longer time frame.

All right. thank you very much.

Our next question comes like Neely Tamminga with Piper Jaffray. Please proceed.

Great. Good morning, you guys. Well done navigating through a tough environment.

Thank you.

Yes, you bet. So have two little questions here for the guidance and what you are seeing and then I want to ask a super techie question, if I may. So bear with me.

Let's go find somebody to answer them, Neely.

Yes, I am giving you a heads-up to make sure we find somebody in the room. Okay. So on the underlying comp metrics guidance, I don't think I had heard this but could you break it down in terms of what you are actually expecting in terms of drivers of that comp guidance for Q1? And how should we be thinking about like your EURs and things related to that maybe balance of the year as well for the full year guidance what's the comp metric looks like?

Well for Q1, Neely, I mentioned some of the weather challenges that we and everybody else had to start the quarter. So I think traffic is probably is more of an issue in the first quarter and hopefully with some of the things we gone from the marketing and loyalty and those things that we put in place last year will help traffic as the year progresses. So I think, while we didn't call it out specifically, the assumptions are, we continue to drive the ticket. We continue to drive conversion. We are working on the traffic. We hope it improves as the year progresses based on the things that that we have been doing.

Okay.

I would add to what Mike said on the traffic is that, once we step back and look at the first six weeks, in the weeks when we are not whether effected, we look pretty good on the traffic side. We are not ready to call any wins or say that we have got iron clad trends that we expect to go at this rate forever, but it looks pretty good. Sometimes you can't tell call because you may have something pent up affect when you have store closings and store delays and but it's looking better. So I think that's encouraging to us.

And to us as well, so that's good to hear that that's coming through. And then in terms of just the store openings this year versus last year, are there any specific timing shifts of quarters that we need to be mindful of as we model this out?

Well, we called out that the openings would be more back-ended and the closings would be more front-ended and that is the case. So I think you should be thinking about. We closed seven or so. We have closed a few already. So those closings will impact the rest of the year. The rest of the closings, I think the majority of them will occur in Q2 and Q3 and then the openings will be a little more back-ended, more openings in the third quarter than any other quarter.

Okay, that's what I was driving at. So it's really more Q3 that you guys will see most of those openings.

If you look at our schedule right now, which will be all over the place. It will change next time we talk. We would expect to open 11 in Q2 and right now eight in Q3, but as we do more deals, that's going to change and as landlords change schedules, they are going to change. But I think Mike's idea is exactly right. It's a second and third quarter phenomenon and probably when it all settles out, it will be a third quarter for openings.

Okay.

We have been through this before. That's just the way it comes out. So I am hedging a little bit, but I think we have got some significant opening activity happening in Q1 and Q2 this year which is good. So we will get some in there and hopefully see some good results out of those.

Okay, that's helpful. Then one super techie question. I know that you guys, basically everybody else in retail basically runs Oracle, and I guess what I am trying to understand is, are you able, as you can have, implement your CRM and things related to that, are you able to interface with no SQL type database management systems versus the traditional SQL-based ones which really is going to ultimately help you with agility? Is that part of some of the investment spend that you guys have been making or is that not yet on your horizon?

Well, I am not going to get too technical here, Neely, but I will say this. We have Oracle in place, but it's not in place in every corner of the company. We focus on Oracle as the merchandising for the company. So by saying that, you can assume that there are multiple interfaces with other systems such as POS, such as e-commerce platform, such as our supply chain system. So doing interfaces is something that we do -in and day-out and do a good job of it. So whatever we end up doing, wherever we going, what we talked about order management is a big initiative this year. We are going to have interfaces that we do and we are used to doing that. So I don't see that as an inhibitor. We see it as an opportunity because we are able to go out and get best-of-breed products and combined them with what Oracle does one bring to the table on the merchandising end of things.

We are not going to just get up and running on Oracle. A year or so ago, we had to do 63 interfaces.

I think it ended up being more in the 70s. But yes. It's something where we have the ability to do and I think where it becomes more of issue is on e-commerce side, because that's such a rapidly changing part of the business and you have got a be a little more agile in getting smaller chunks of capabilities in place and I think that's the difference maybe that I would call out is, you have got to focus on the agility a little bit more in those areas like e-commerce order management. And I think we will be positioned well to do that with some of the changes we have made in our process to facilitate that.

Okay, that's helpful. I was just trying to -- it fits exactly right. My goal was to look and try to get that agility factor on e-comm site as well as feedback and your customer purchasing behavior data, right.

Yes. Where you are headed with the question is exactly where we are thinking about. We have got to be able to tie-in the transactional level detail that's coming from CRM and loyalty with the behavior online, with the e-commerce customer and just our merchandising system and how that feeds the inventory to the right place and that's what's all about.

All right. That's interesting. Congrats again, you guys and looking forwards to a great 2014 from you.

Thank you.

Our next question comes from the line of Jeff Black with Avondale Partners. Please proceed.

Hi, thanks. Congrats on a nice start to the year, guys.

Thank you.

On the marketing stuff and traffic, can you just give us a little more color? It sounds like the test, well it may have showed some improvements, it wasn't the panacea on traffic that you may have thought. What are we shifting around on marketing and what do we think is the key to driving traffic? And then, in addition, on the K Club and on the CRM stuff, is that a real opportunity to drive traffic this year and into next, in your view? Any color on that?

Okay, on the marketing test. We are seeing traffic increases and sales increases in those markets. It's clear and we followed that all year. So it is having a positive impact in terms of driving both traffic and conversion in there. The issue, I think, is the mix of the media. The fact that we did a lot of TV in those tests along with some print drops and if you look at the TV and the cost of the TV and the fact that our markets aren't as dense across the country, we are still somewhat scattered because we haven't built out our store base like a lot of other retailers have and we are still growing as we talked about our growth plans here. And that is a big part of the marketing being efficient. So the cost of the TV holds back your return a little bit because to the extent you hit TV more I think the traffic effect is not as short-term. Now print drop will get somebody into the store. So that's been that the outcome of the test. So what we are to do is go into next year, maybe focus little bit more on print, I think, is the direction and also focus on the markets that make the most sense from a cost standpoint. So you will see us maybe shift the spin from TV over to more direct response type vehicle like print. I don't think we are saying we will never do it, TV. I don't think that that's the message. It's a key way to get your brand out in markets where you don't have the awareness. But as we go into 2014, I would say that's our approach to curtail that a bit and focus on a little bit more traffic driving in the near-term. CRM and loyalty is in place. We had a lot of signups in the fourth quarter. So we do expect that to have an impact on the business this year. That customer spends more money and shops more frequently and by our communications as we have evolved that in loyalty program. I think will see an increase in that frequency or that's what we are looking for. So yes, I think that can impact the business this year.

And then secondarily on the cash. We are spending more money on expense in this year, obviously, but also we have a nice cash balance. What are you comfortable holding and might we see something like a repurchase program et cetera for shareholders this year? Thanks.

We always are evaluating that. Our board will be here in a couple of weeks. We will talk about cash and what we want to do. We have done a buyback in 2011 and 2012. It covered about 11 months, I think. We will look at all the alternatives. It might be a buyback. It might be something else. We are constantly aware. As to level, I think that depends if you go anywhere from $40 million to $60 million days then we probably wouldn't be arguing with one another about that and I think that's about all I know to say about it because it's not exactly a management decision. We get a chance to recommend and we do work, typically, with an advisor to help us understand exactly what we want to do and how to do it. Then we take it to our board and talk about it.

But we are evaluating that, Jeff. We do have a heavier CapEx here this year with more stores and some key projects that we got away and that's something that we have on the radar.

Fair enough. Best of luck, guys.

Thank you.

Our next question comes from the line of David Magee with SunTrust Robinson Humphrey. Please proceed.

Hi, good morning, guys. Glad you got a better trend. A couple of questions. One is, as you look into the spring, do you think there is any chance we might see some pick up of business that you might have lost in February?

Maybe. I think we are selling spring right now in our stores and I think everyone is really, especially in the South where we are not accustomed to a hard and persistent winter. I think people are very ready for better weather and a better opportunity to think about spring. So yes, I think there is an opportunity that we will have some of that but we are not huge outdoor guys, David. That's not a big part of our business, given the size of our stores. So at some point in the first half, we have a good bit of competition from the guys who sell flowers and fertilizer and Scotts Turf Builder and all of the outdoor stuff. So there's a balance that we have to always be aware of. So the early part of the second half is typically better for the Corgi's [ph].

Thanks Robert. My second question has to do with E-commerce side. What do you think of the competition online vis-à-vis the Internet only retailers that might be out there? Are you aware of them too much? Do you find yourself have to respond to what they might be doing that's something likely to grow the time?

Well, I think we are aware and looking at our marketing guys who work in that area are constantly reporting to us on what's going on online in this sector. We see that every week, actually. So we try to be aware of that. Probably the place where we see maybe the most direct opportunity to respond are some of the deal of the week sort of guys, the two deals a weak kind of guys where when we you are running promotions, you want to be in a position to be competitive with some of those sites that do a really nice job with that One Kings Lane and zulily and others who provide looks many times which beyond clothing and other things, they provide home décor looks that are interesting to customers. We do that too. So we are always trying to be aware of what's happening around us and try to respond if we see a need to do that.

And also the capabilities of those other sites and just monitoring how they are able to do it and seeing how we can make that happen in our platform and improve the experience.

Great. Thank you and good luck in 2014.

Thank you.

Our next question comes from the line of Joan Storms with Wedbush Securities. Please proceed.

Hi, Robert. Hi, Mike.

Hi.

Most of my questions have been answered but I was just curios about any more details on the corporate headquarters relocation. Are you going to be in a temporary location for the summer? And then where will your new full time location be? Any more people you can accommodate there?

It's not temporary. We are looking at moving to a new leased site where, hopefully we will occupy a building. Maybe it is still in Nashville and we will try to continue to have all of our group together rather than being in temporaries where you have a tendency to start getting fragmented because of space needs. So we are just at the end of a lease. It's a very natural thing. We have been this property for seven years. It was long as we expected to be here. So it's the right time and right move and it's just going to be little bit of the pain to move but we just have to go through it. But we think we can accomplish it in a fairly short period of time.

Okay, and then distribution center at the, just remind me of the old location?

Yes, that's in Jackson.

Jackson, Tennessee. Yes.

Okay, so you obviously are planning to grow square footage now so you can accommodate more people up in the new space in the new building.

That's right.

And then just a quick follow-up about e-commerce. How is the buying organization set up for stores and e-commerce? Is it all under one (inaudible) or do you have separate buyers for online only or how have you set that up so far and where do you see that going?

We have a group of buyers that we are pretty much exclusively for e-commerce. This is our second pass through on e-comm. We opened this up back in the early 2000s and one of the mistakes that we think we made was not devoting enough attention and firepower to developing SKUs and developing business. So we have a group that does that. They work very closely with our in-store, our brick-and-mortar buyers and that team. They have their own plan. They have planners and they have their own plan that's fully integrated into our merchandising and financial plans. They meet together a lot and our development groups that work in brick-and-mortar stores provide as much information and as many opportunities as possible to the brick-and-mortar guys. So I think it's a well coordinated effort right now, but we have liked the idea of there being a separate team. So far that seems to be the best way to work. We are just looking for more ways to make it possible for them to work together effectively.

Okay, and then lastly, I think David might have asked about this before but in the market where there has been some weather recovery, there maybe some warmer weather and how are you feeling about the spring setup year-over-year? Any categories that you are expanding in or that you see get ready for Easter? You had experimented last year to some success but if you can comment on the merchandise at all for spring?

Well, we have a later Easter. We are doing very well relative to the plan for the first half and the spring season. We have a later Easter, but we planned Easter up significantly this year. The timing of it is not, in our opinion, it won't be a really big factor. It's just a little later. We think it is a bigger seasonal opportunity than we have been giving it and as we have worked on expanding that opportunity over the last couple of years, that has been positive. So we look forward to even bigger Easter this year. The spring trends that I mentioned in my remarks continue to be basically the heart and core of the business and will be through the balance of the spring. We will begin to have some of our so-called summer items that relate to outdoor entertaining and outdoor activity and specifically around July 4 and things like that, it will hit the store a little bit later, but I think you will see a very pronounced continued casual, country, coastal, vintage look to our merchandise. And so far it's resonating really very, very well. So I think we are pleased with where we are at the moment. Easter's really not the biggest opportunity in the first half. Mother's Day is a much bigger and longer term sales. We typically think of it as a two week period as opposed to Easter being four or five days to a week. So the Mother's Day prep and build up to that is the most significant event in the first half as far as merchandising goes.

Okay, great. Well, thank you very much, and good luck to this year.

Thank you, Joan

Our next question is from the line of Anthony Lebiedzinski with Sidoti & Company. Please proceed. Anthony Lebiedzinski - Sidoti & Company: Good morning. I had a question first on the e-commerce. So I think Mike you gave the numbers for the fourth quarter. I think it was 5% of your sales. So can you give us the number for the year for e-commerce?

For the fourth quarter, I think the number was $6.9 million, almost 5% of sales. For the year, that number is in the 18 million, a little more than $18 million range. So a little bit last the penetration that we saw in fourth quarter because the business has been building as the year progresses. So as we can look to next year, I think I called out at 25% to 30% increase in the business. That's what we are shooting for. Anthony Lebiedzinski - Sidoti & Company: Right, and I think you mentioned that one of your goals is to eventually get that up to 10% of your overall sales. So as that goes on, how should we think about the impact on the profitability of your overall business as you increase e-commerce?

Well, I think we were at that point where we are making this investment in order management and that's the reason to help us build the business to where it could do 10% type of number. And that's a major project but it's also a major project for the company. It's not just an e-comm thing. And increasingly we look at this as a benefit for the stores and not just the site that's running over here at the side but is trying to generate its own P&L. So there is so much crossover here and as we implement order management capabilities and you are talking about things like fulfilling from store inventory and down the road shipping from store. You see how the lines can get crossed. So I do think that we are at a point going forward as we increase the sales more, there is a better flow through on that incremental business because we have done a lot of the foundational work to get the site stable and working well. So I do not think in the near term here, it's going to have a tremendous, like if we shift to e-commerce slice of the business, I don't think its going to put too much within the P&L. I don't see that. Just to clarify, last year total revenue on the site was about $20.3 million. That was excluding some of the shipping revenue and I quoted $18 million. So number is $20.3 million. Anthony Lebiedzinski - Sidoti & Company: Okay, all right. So my other question was about the loyalty card program, the K Club. So can you give us some metrics on that, as far as how many members are currently signed up and I think you did say that these numbers are spending more than non-members. So is there any way you can give us some numbers to show us where you are with this initiative?

Yes. You have got to take into account that we rolled this thing out in October of last year. So we are very early on in collecting a lot of that. Just to give you a frame of reference though, we had around 1 million customers sign up at the registers during the fourth quarter. So that's a significant amount of people that we collected data on and we are tracking. That customer, it's a little early again, Anthony, but on average we are seeing them spend about $25 more than the other transactions. So based on that alone, we see a big opportunity to leverage that program and start to tailor some of the messaging as we get into 2014 to those customers and make them a more frequent visitor to the store. Anthony Lebiedzinski - Sidoti & Company: Okay, and as far as the corporate office relocation, I would imagine the bulk of those cost will be incurred in the third quarter?

Mainly that is an estimate, Anthony, the difference in space and rent that we anticipate. So I would say that most of that is going to be over the third and fourth quarters. I think the one time nature of it, the move itself, whenever that's settled, will not be as significant. Anthony Lebiedzinski - Sidoti & Company: Okay, great. Thank you very much.

Thank you.

Mr. Alderson, I am showing no further questions. I will now turn the call back to you for any further statements or closing remarks.

Well, we appreciate everyone's interests and we thank you for your time today and we will talk to you in May. Thanks a lot. Bye.

Ladies and gentlemen, that concludes the conference call for today. We thank you for your participation and ask to please disconnect your lines.