Kirkland’s (KIRK) reported meager second-quarter 2010 results with earnings of $0.16, which was below the Zacks Consensus Estimate by $0.02. The company’s susceptibility to the global economic downturn coupled with stiff competition, severely undermines the company’s future growth prospects and profitability.
The global economic environment has been challenging for the past fifteen months. Declining real estate value, reduced lending by banks, solvency concerns of major financial institutions, increase in unemployment levels and significant volatility in the global financial markets have negatively impacted the level of consumer spending for discretionary items.
The company s sales are also highly dependent on its ability to anticipate and respond to changing merchandise trends and consumer demands in a timely manner. Any slackness in doing so would spoil the company’s image with its customers thereby reducing customer traffic which in turn would finally affect revenues and margins.