Good morning and welcome to Kirkland's Third Quarter 2019 Conference Call. [Operator Instructions] Please also note today's event is being recorded. At this time I'd like to turn the conference call over to Jeff Black, SCR Partners. Please go ahead.

Thank you. Good morning and welcome to Kirkland's conference call to review results for the third quarter of fiscal 2019. On the call this morning are: Woody Woodward, Chief Executive Officer; Mike Cairnes, President and Chief Operating Officer; and Nicole Strain, Chief Financial Officer. The results as well as the notice of the accessibility of this conference call on a listen-only basis over the Internet were announced 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 the 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 SEC including the company's annual report on Form 10-K filed on March 29, 2019. With that I will turn it over to Woody.

Thanks Jeff. Good morning and thank you for joining us today. The third quarter remained challenging. We made progress on key merchandising initiatives and will continue to add new categories to Kirkland's to broaden our reach. E-commerce trends reaccelerated in the quarter and we're driving more of a total business BOPIS which supports our focus on running a true omni-channel platform. Looking at some specifics for the quarter, we had success in our seasonal products of Harvest, Halloween and early Christmas merchandise. Our new categories are starting off well. Collections of dinnerware, flatware, drinkware, households, dining furniture and tabletop textiles are emerging as the clear winners. New additions of rugs and bedding remain promising and we're excited about their potential as we increase category awareness. We experienced mixed results in core categories. Furniture and textiles performed well though the mix shift to furniture is impacting margin rate. We're pleased with the acceleration in our e-commerce revenue. Our BOPIS sales accounted for a growing share of e-commerce sales in the channel and we're encouraged about its potential to improve traffic and profitability. Brick-and-mortar traffic remained weak. Our marketing spend did not drive the returns we were looking for in Q3 which resulted in additional merchandise promotions that negatively impacted the margin rate. At the same time, new categories and growth and e-commerce were not enough to offset negative store comps which deleveraged operating expenses. We've adjusted our outlook to reflect these trends and Nicole and Mike will discuss those later. We are working aggressively to address infrastructure and operating costs. As we look to the fourth quarter, our focus is on helping customers find ways to bring happiness home. We have a more purposeful depth in key items to complement our seasonal merchandise and our new categories reinforce Kirkland's, long heritage…

Thanks Woody. As we have outlined, we're moving aggressively to transform Kirkland's to support a more profitable model. Woody touched on the key initiatives across merchandising and marketing. In addition our strategy includes work to optimize our store footprint to better support an omni-channel framework. It encompasses better supply chain efficiency and improved costs via direct sourcing model. As well, it involves reducing costs across the organization. We're working methodically and urgently against this plan. Let's start with stores which will remain a critical aspect of our direct-to-consumer strategy, many of our customers are choosing pickup in store as their preferred delivery channel for their e-commerce purchases. Customers ordering online and picking up in-store accounted for over 50% of the e-commerce business in the quarter. Buy online pick up in store inside of two hours with store inventory is approaching 30% of the e-commerce business while over 25% of the business is special order online and pick up, after we deliver from the distribution center. The good news is that the profit model of this omni-channel transaction is significantly better than shipping directly to the consumers' residence. Clearly, stores are the secret sauce in executing an effective e-commerce business. Therefore we're on the right track. As we transform our store experience to support a true omni-channel platform, we're taking aggressive actions to streamline our brick-and-mortar infrastructure. We made solid progress in the quarter on our program to broadly reduce occupancy costs and the initiative will include closure of unprofitable stores. We expect to have completed Phase 1 of this process by January. Supply chain initiatives are supporting our evolution. We stood up a 3PL distribution center south of Dallas that has successfully navigated its first holiday season. This distribution center is important because it saves transportation costs and mitigates risk…

Thank you, Mike. Net sales for the third quarter decreased 6.2% or $9.6 million compared to the third quarter of the prior year. The change in sales includes a comparable store sales decrease of 6.4% which includes a 25.9% increase in e-commerce revenue and a double-digit decline in brick-and-mortar sales and that's on top of a 1.4% combined comp increase and a 22.9% increase in e-commerce in the prior year. In our brick-and-mortar stores, soft traffic continued and was the primary driver of the comparable store sales declines. The macro channel shift and the increasingly promotional environment both contributed to the traffic declines. E-commerce accounted for $23.5 million in revenue during the quarter or approximately 16% of total revenue. We saw increases in traffic and significant increases in conversion with some of our efforts to improve our online shopping experience beginning to impact our results. These were offset by a decline in average ticket. For the quarter, approximately 53% of our e-commerce sales were fulfilled in-store at a higher level of profitability than direct-to-consumer sales. Gross profit margin in the second quarter decreased 250 basis points from the prior year to 27.7%. The merchandise margin decreased from the prior year by 360 basis points to 51.8% and that was driven by a decrease in product margin from both product mix and incremental discounting and an increase in inbound freight due to rate increases and product mix shifts. Outbound freight costs which include e-commerce shipping decreased 80 basis points as a percentage of net sales. We saw the benefit in the quarter of standing at the second retail distribution center and reducing overall miles to deliver product to our stores. We also had a decrease in e-commerce shipping due to the increase in store-fulfilled online sales and savings from a new…

Thanks Nicole, and thanks to everyone on the call for your interest in Kirkland's. While we are not yet where we want to be in terms of results, we are executing against the plan we laid out to transform the business to a more profitable model. We're encouraged by progress in a number of important areas, and we've accelerated our work to achieve our goals. I want to thank our associates for their drive, dedication and all the hard work they do each day to make Kirkland's the best customer experience. The team will be available after the call for any questions you may have and look forward to speaking with you and updating you on our progress. End of Q&A: Ladies and gentlemen, with that, we'll conclude today's presentation. We do thank you for joining today's conference call. You may now disconnect your lines.