Highlights:

- Comparable store sales increase 5.2%

- Reverses prior-year loss with earnings of $0.17 per diluted share

- Marks highest first quarter earnings as a public company

JACKSON, Tenn., May 21 /PRNewswire-FirstCall/ -- Kirkland's, Inc. (Nasdaq: KIRK) today reported financial results for the 13-week period ended May 2, 2009.

Net sales for the 13-week period ended May 2, 2009, were $83.3 million compared with $84.1 million for the 13-week period ended May 3, 2008. Comparable store sales for the first quarter of fiscal 2009 increased 5.2% compared with 4.3% in the first quarter of fiscal 2008. Comparable store sales in mall stores increased 8.2% for the first quarter, and comparable store sales in off-mall stores increased 4.2%. The Company opened 3 stores and closed 10 stores during the quarter to end the period with 292 stores.

The Company reported net income of $3.5 million, or $0.17 per diluted share, for the 13-week period ended May 2, 2009, compared with a net loss of $2.6 million, or $(0.13) per diluted share, in the 13-week period ended May 3, 2008. Income tax expense for the 13-week period ended May 2, 2009, includes a rate benefit of approximately $1.0 million, or $0.05 per diluted share, related to the reversal of a portion of the valuation allowance on the Company's deferred tax assets established in prior periods. The reported net loss for the first quarter of fiscal 2008 included no tax benefit for the period.

Robert Alderson, Kirkland's President and Chief Executive Officer, said, 'Customers are responding well to our merchandise assortments, and traffic was up slightly during the quarter. We continue to benefit from a lower cost structure -- particularly in occupancy costs. Additionally, lower inbound and outbound freight costs had a positive effect on margin during the quarter.

'While the first quarter presented somewhat easier sales and margin comparisons, we are very pleased with the strong start to the year. We continue to focus on value, controlling operating costs and inventory, and improving our store base. While pleased with our operating performance thus far in 2009, economic conditions continue to cloud forward visibility.'

Revised Fiscal 2009 Outlook

The Company issued its initial targets and expectations for fiscal 2009 in March 2009. These expectations do not account for a year-over-year deterioration in the macroeconomic environment on the scale experienced in fiscal 2008. Should the recession continue to worsen throughout fiscal 2009, the Company will revise its expectations accordingly.

    Store Base: The Company started fiscal 2009 with 299 stores compared with
                335 stores a year ago.  For fiscal 2009, the store base is
                expected to average approximately 30 stores less per quarter
                than the comparable quarters of fiscal 2008.  In accordance
                with the Company's five-year plan to convert its store base
                to off-mall locations, closings from natural lease
                expirations are expected to be approximately 35 to 40 stores
                with approximately half of those closing during the first two
                quarters of 2009 and the other half closing after the holiday
                season in January 2010.  New store openings are expected to
                be approximately 15 to 20 stores in fiscal 2009 with half of
                these opening during the first two quarters of 2009 and the
                other half during the third and early fourth quarters.
    Net Sales:  Full year sales are expected to be moderately below fiscal
                2008 based on the smaller store base throughout the year.
                While early second quarter comparable store sales trends
                continue to be positive, future comparable store sales gains
                are difficult to predict in the current environment.
    Margins:    Full year merchandise and operating margins are expected to
                be moderately above fiscal 2008 levels.