Kirkland's Mall Sales Improve, Although It's Still Retreating To Other Locations

There isn't much good news out there for malls in general. Many of them are cutting back their hours and dealing with chains from Gottschalks to Ann Taylor closing stores around the country.

But home-furnishings chain Kirkland's is performing better in its mall-based locations than stores that are stand-alone units or part of a strip center. At locations open at least a year during the Jacksonville, Fla.-based company's fourth quarter, Kirkland's sales rose 8.2 percent in malls compared to a four-percent gain at non-mall stores. Most impressively, these sales increases are taking place while direct rivals such as Williams-Sonoma are hurting.

Though Kirkland's best-performing stores are in malls, we're seeing less and less of those formats. Of the 35 to 40 store closures Kirkland's plans this year, most of them are mall locations. And the 15 to 20 new stores coming online this year are mostly off-mall locations. Kirkland's currently operates a total of 299 stores, 91 in malls and 208 off-mall, so you can see just how quickly the company is shifting its attention elsewhere.

The downside to better sales in malls is the higher rent Kirkland's must pay at those venues. A year ago, president and CEO Robert Alderson said (see bottom of page) off-mall rents are significantly cheaper, at $25 a square foot compared to $41.

Like many other retailers, Kirkland's management is trying to renegotiate rents at its malls stores as part of an ongoing financial turnaround. The strategy seems to be working so far: Kirkland's reported a net income of $15 million during its fourth quarter, up from $1.5 million during the same year-ago period, putting it in a position as a strong-performing operator in a very tough environment.