Kirklands vs Pier One

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Financial Statement Analysis

Kirkland’s

And

Pier 1 Imports

I. EXECUTIVE SUMMARY

Kirkland’s Inc. and Pier 1 Imports are among the major players represented in the retail home décor industry, where there is a constant demand to provide the right merchandising mix and marketing program for consumer attraction. However, in recent years there has been a decline in the retail home décor industry. Consumers have cut spending in anticipation of the continuing rise in gas prices, unemployment rates, interest rates, consumer debt and taxation. In the midst of a sluggish, unstable economy, both companies struggle to be profitable. In addition, the increased consumer spending in the fourth quarter for both companies does not sustain their revenues annually. Unfortunately, the success of both companies is dependent upon factors that are uncontrollable. Both companies can gain profitability if drastic improvement occurs in the current economy. The following is a financial analysis of both companies that will assist in determining which company would be worthy of purchase.

II. TABLE OF CONTENTS

I. EXECUTIVE SUMMARY2
III. DESCRIPTION OF THE COMPANIES4
IV. DESCRIPTION OF THE INDUSTRY6
V. ANALYSIS OF INCOME7
VI. ANAYLYSIS OF BALANCE SHEET10
VII. ANALYSIS OF STATEMENT OF CASH FLOWS13
VIII. ANALYSIS OF THE STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY16 IX. ANALYSIS OF THE NOTES TO THE FINANCIAL STATEMENTS17
X. OVERVIEW OF QUARTERLY DATA22
XI. REPORT OF INDEPENDENT AUDITORS23
XII. MANAGEMENT’S REPORT AND ANALYSIS24
XIII. ADDITIONAL RATIO ANALYSIS25
XIV. DECISION BASED ON FINDINGS……………………………………….26

III. DESCRIPTION OF THE COMPANIES
KIRKLAND’s ®
Headquarters

805 North Parkway
Jackson, TN 38305
731-668-2444Headquarters
100 Pier 1 Place
Fort Worth, TX 76102
(817) 252-8000
www.kirklands.com
www.pier1.com

Fiscal Year End
Saturday closest to January 31st
FY Ending February 3, 2007
FY Ending January 28, 2006Fiscal Year End
FY Ending March 3, 2007
FY Ending February 25, 2006

Retail (Home Décor)
Retail (Home Décor)
NASDAQ
Ticker Symbol KIRKNYSE
Ticker Symbol PIR
Transfer Agent
StockTrans
44 West Lancaster Avenue
Ardmore, Pennsylvania 19003
(610) 649-7300Transfer Agent
BNY Mellon Shareowner Services
480 Washington Boulevard
Jersey City, NJ 07310
Phone (888) 884-8086
Annual Stockholder’s Meeting data not available.Annual Stockholder’s Meeting held June 20, 2008, in Fort Worth, Texas; 2009 date not provided. Operations
As of February 3, 2007:
349 stores in 37 states
Operations
As of March 3, 2007:
1076 Pier 1 stores in the US
36 Pier 1 Kids stores in the US
84 Pier 1 stores in Canada

SWOT: Kirkland’s
Strengths
Affordable prices
Item focused merchandising
Increase in gross profits of over 11%
Broad market appeal
Ever-changing merchandise mix
Stimulating store visual presentationWeaknesses
Potential store lease termination by landlords upon a change in control of Kirkland’s Investing activities yielded negative cash flow
Comparable store net sales fluctuate
Decline in stock price
Opportunities
Approximately 650 additional locations in the US that are available to support a Kirkland’s store Internet purchasingThreats
Instable economy
Increased competition
Dependence on foreign imports (from China and India); poor relations between the U. S. and these countries could impact their supply of merchandise. Mortgage Industry

SWOT: Pier 1 Imports
Strengths
Internet purchasing
Product distribution agreements with Sears Mexico and Sears Puerto Rico (store within a store format-no real estate or employee obligations)
Weaknesses
Decline of net sales
Weak product merchandising and marketing mix
Operating expenses rose by 8.64%, exceeding net sales for 2006and 2007 Loss in gross profits from $42,812,000 to a loss of...
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