- KIRK reported solid quarterly results characterized by 10% SSS growth despite 44 store closures. E-Commerce growth accelerated to 77%+ on DTC and pickups and looks to approach 100%+.
- After many years, the Company hit EPS+ and is now at an EBITDA run rate of roughly $30MM. All LT debt was paid off.
- Tailwinds from the favorable dynamics within the home segment (stay at home) and fewer store-based competitors than a year ago aiuded momentum created by KIRK's own merchandising, brand, omni-channel strategies.
- Best comp HOME put up stellar results a week or so ago, but they appear to have been priced in with the stock selling off several points on inventory concerns. That said, one can drive a truck through the valuation gap between KIRK at 0.5x sales vs. HOME at 1.7x.
- Pruning underperforming stores, accelerating e-commerce sales, building inventory for the next cycle, turning EPS+, and paying off all LT debt reinforces our bullishness on this turnaround/underfollowed stock. We reiterate STRONG-BUY $25 recommendation/price target, which is an enterprise value (EV) of $550MM or 1x next year annual sales adjusted for conservative growth assumptions of 10%. We recommend aggressive purchase of shares in the single digits as risk/reward favors the bulls.
Analyst's Disclosure: I am/we are long KIRK.
We intend to provide additional commentary in our ongoing coverage of KIRK.
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