Good morning. And welcome to Kirkland's 2019 Fourth Quarter Earnings Call [Operator Instructions]. Please also note today's event is being recorded. I would now like to turn the conference call over to Jeff Black of Investor Relations at SCR. Please go ahead.

Thank you. Good morning. And welcome to Kirkland's conference call to review results for the fourth quarter of fiscal 2019. On the call this morning, we have Woody Woodward, Chief Executive 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. The 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 March 29, 2019. I will turn it over to Woody.

Thanks Jeff. 2019 was a year of significant transformation for Kirkland's. We took bold steps to reinvigorate our assortment, realign our infrastructure and improve e-commerce and we're well on the path of implementing direct sourcing. Overall, the work supports our long-term strategy to preserve Kirkland's valued DNA as we increase relevancy and improve retail fundamentals. During 2019, we reinvented core product assortments and added new categories that make us more important to the Kirkland's loyal customer base. We addressed supply chain flow and investing in our omnichannel platform. The results we reported today reflect the depth of the transition with plans to close 2,800 underperforming stores and a further reduction in operating expenses. The results also reflect encouraging progress. We achieved strong e-commerce growth in the quarter and we had better performance in segments of the assortment, including furniture and tabletop. We ended the year with a solid balance sheet, and we believe we're well positioned to execute our vision and strategy for Kirkland's. Let me share some thoughts about our key priorities for 2020. It starts with further accelerating product development to build on what we've accomplished in 2019. Our goal is to be in the consideration set for a complete home furnishings projects in addition to the finishing touches. Let me elaborate on that. Kirkland's has historically been known as a key resource for accessories when a home decor project is near completion. We've been a ideal stops to pick up our reads for the front door, a candle for a certain room, some finishing artwork or even some holiday decor that makes your make your home happy as a happy place to live. We have a long history there and the focus is to serve our customers well. At the same time, we've been losing market share…

Thank you, Woody. Before speaking for the specifics of the quarter, I would like to address some of the larger financial items impacting the fiscal year and how we see those affecting us as we move forward. As Woody discussed, we took significant steps during the year to transition Kirkland’s to a model that can generate profitable growth and we believe we will make progress down that path in 2020. We rolled out new categories and made significant improvements in both the quality and design of our merchandise. Our full year performance in 2019 reflects margin pressure related to rebalancing our assortment to improve quality and design, while still recognizing the increasingly promotional competitive environment. During the fourth quarter, we experienced strong sell-through of our holiday merchandise and had a new store start immediately after Christmas. We ended the year with two consecutive months of positive comparable sales with January up 6.7% and e-commerce growth pushing 40% for the quarter. In addition to the merchandise changes, our fiscal 2019 results include initiatives to streamline our model to enable us to better compete in the future. We initiated aggressive negotiations with our landlords that allowed us to improve profitability at a number of our locations, and we negotiated an exit out of locations that were unprofitable, which we’ll be closing in the first quarter of 2020. The majority of the benefit of the reduced occupancy costs will be realized in fiscal 2020, but much of the expense was reflected in the fourth quarter of 2019. We will continue to pursue lease negotiations throughout the remainder of our portfolio and to refine our store footprint to support an optimal omnichannel model. We stood up a second distribution center outside of Dallas, which reduced our transportation miles and generated annual net savings. We…

Thanks, Nicole. I want to end by saying our priority at the organization is the safety and wellness of our employees, who work so hard every day to make Kirkland's a special shopping experience and our customers who are visiting our stores. We're following the guidance from the CDC, as well as state and local public health agencies, to respond to the rapidly evolving situation with coronavirus. While there's uncertainty in the near term, we feel good about our strategy we have in place. And we're well-capitalized to continue to transform the business in 2020 and beyond. With that, I'll turn it over for any questions you may have. Thank you.

We will now begin the question-and-answer session [Operator Instructions]. Our first question today comes from John Lawrence of Baraboo. Please go ahead with your question.

Woody, could you give us a sense of the fourth core? And I know this product set is evolving. But give us a sense of the things that you were really pleased about. And what really you saw took hold and sort of a progress of how that goes for the first half of 2020?

One of the things that happened in the fourth quarter was that November got off to a little bit of a slower start, primarily because of some timing between Thanksgiving and the Christmas holiday. So we ended up negative in November. But then we came back with our first positive comp in December in many years, which we were very pleased with. And it was primarily driven by our holiday assortments that were really well received and some of the new categories starting to take hold. Then we ended up in January with even more improvement with a positive 6.7% comp. We started off February in a pretty good shape before all the disruption in the marketplace. And so I'm pleased with the way our customers, our current loyal customer base is responding to new categories with some of the clear winners being the things that have always been clear winners for us, which are our candle assortments, our holidays assortment. But from renewed categories that’s going to be really been working were the tabletop business, which has been very, very well received and then to a lesser degree our rug business. It’s been very much what we expected but we feel like we have more opportunity there and embedding it still in development, basically with the last category that we landed. We've also added embedded in all the merchandise new categories was some edits to the assortment where we took out our apparel that we just didn't feel reflected our efforts to become a serious home furnishings retailer, and so that was done in the fourth quarter. So, we ended up with those clean inventory going forward, like Nicole said, with very little risk, because we didn't carry forward any of these seasonal products. And now we're landing new products, which we realize are very focused and our customers are responding to. So despite the current disruption with the coronavirus and the banking situation, and stock market, we feel good. We think that we’ll emerge from this with a much healthier business and not only are we bringing along our current customer base, which seems to like our new changes, but we're also acquiring new customers. And so any other color you need on that I'd be happy to answer.

So we'll continue to edit the presentation and when will all the new products, I know you're constantly making edits in certain, but as far as the bedding and all of that, by spring or I would say summer of ’20, all the store look like pretty much with all the new product what you want it to be?

Yes, that's a good question, because merchandising is an evolving process. It's a journey that you're never complete, because you're always improving. But I think that we came out of Christmas this year and get a floor set right after the holiday that really took hold with our customer, and that's why we delivered such a good positive comp in January. It was fresh, it was new. So I think our stores look pretty darn good right now, there's always the next wave of products coming right now. We just landed our outdoor assortment on the floor, so we're proud of the way that looks. So it's an evolution. There's still a few issues in the store that I would like to improve on of course. But the stores are looking pretty good despite the current environment they're looking for a good, so please go in and take a look and let us know what you think…

And on that subject, as far as China is concerned at this point, any shipping issues or problems with containers as you look forward at this point?

There are. We are having some slowness of some of our products coming in. We ended up the year with a little bit of extra inventory to allow us to mitigate the risk. Now, we're starting to see the factories come back online. We do build a little bit of a pad into our product flow, especially on holiday products. So, I think that we will experience some delays, but last year we also took the initiative with some of the tariffs to move and balance our assortments out of China, so that we're not 100% as dependent on China as we used to be. Now we've got Vietnam up and running, we've got our business in India doing really well and then of course our domestic sources. So, we feel pretty good. There will be some disruption, but I don't think at this particular point, its material but we'll have to wait and see, because the environment is changing so quickly.

Last question, Nicole, do you have a sense of, if you could give us the 28 store closures for the first quarter, the amount of sales and the amount of loss that you will be exiting out of those 28 stores?

So, the 28 stores definitely represented the first half at the stores that were EBITDA negative. On average we had some that were significantly negative and some that were slightly positive and trending down. So total that group accounted for roughly $1 million in loss. But again, it was really the stories that were trending down. I think from a sales perspective, a lot of them, it was a mixture of low volume stores and high volume stores that just didn't make money, because the expense structure was so costly in the areas that they were. So, its first phase of us looking at our portfolio and trying to get two things down to the most profitable stores and also the stores in the right places to support our omni-channel vision.

[Operator Instructions] There are no questions at this time. This concludes our question-and-answer session. I would like to turn the conference back over to Woody Woodward for any closing remarks.

Thank you for listening. We really appreciate it and stay healthy.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.