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<SEC-DOCUMENT>0001299933-08-005507.txt : 20081124
<SEC-HEADER>0001299933-08-005507.hdr.sgml : 20081124
<ACCEPTANCE-DATETIME>20081124122442
ACCESSION NUMBER:		0001299933-08-005507
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	20081121
ITEM INFORMATION:		Results of Operations and Financial Condition
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20081124
DATE AS OF CHANGE:		20081124

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			KIRKLAND'S, INC
		CENTRAL INDEX KEY:			0001056285
		STANDARD INDUSTRIAL CLASSIFICATION:	RETAIL-RETAIL STORES, NEC [5990]
		IRS NUMBER:				621287151
		FISCAL YEAR END:			0128

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-49885
		FILM NUMBER:		081209665

	BUSINESS ADDRESS:	
		STREET 1:		431 SMITH LANE
		CITY:			JACKSON
		STATE:			TN
		ZIP:			38301
		BUSINESS PHONE:		731-668-2444

	MAIL ADDRESS:	
		STREET 1:		431 SMITH LANE
		CITY:			JACKSON
		STATE:			TN
		ZIP:			38301

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	KIRKLANDS INC
		DATE OF NAME CHANGE:	19980219
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>htm_30107.htm
<DESCRIPTION>LIVE FILING
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<TITLE> Kirkland's, Inc. (Form: 8-K) </TITLE>
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		UNITED STATES<BR>
	SECURITIES AND EXCHANGE COMMISSION
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	WASHINGTON, D.C. 20549
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	FORM 8-K
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	CURRENT REPORT
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	Pursuant to Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934
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	Date of Report (Date of Earliest Event Reported):
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	&nbsp;
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	November 21, 2008
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	Kirkland's, Inc.
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<BR>__________________________________________<BR>
	(Exact name of registrant as specified in its charter)
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	Tennessee
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	000-49885
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	621287151
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_____________________<BR>
	(State or other jurisdiction
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_____________<BR>
	(Commission
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	(I.R.S. Employer
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	of incorporation)
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	File Number)
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	Identification No.)
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	431 Smith Lane, Jackson, Tennessee
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	&nbsp;
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	38301
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_________________________________<BR>
	(Address of principal executive offices)
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___________<BR>
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	Registrant&#146;s telephone number, including area code:
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	731-988-3600
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	Not Applicable
<BR>______________________________________________<BR>
	Former name or former address, if changed since last report
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	&nbsp;
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<!-- CoverPageRegistrant END --><P><FONT SIZE="2">
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any
of the following provisions:</FONT>
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<P><FONT SIZE="2">
[&nbsp;&nbsp;]&nbsp;&nbsp;Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)<br>
[&nbsp;&nbsp;]&nbsp;&nbsp;Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)<br>
[&nbsp;&nbsp;]&nbsp;&nbsp;Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))<br>
[&nbsp;&nbsp;]&nbsp;&nbsp;Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))<br>
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	Item 2.02 Results of Operations and Financial Condition.
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On November 21, 2008, Kirkland's, Inc. (the "Company") issued a press release and conducted a conference call regarding its sales and earnings release results for its third fiscal quarter and year-to-date period ended November 1, 2008 (the "Press Release").  A copy of the Press Release and transcript of the conference call conducted by the Company are attached hereto as exhibit 99.1 and exhibit 99.2, respectively, and are being furnished, not filed, under item 2.02 of this Report on Form 8-K.
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	Item 9.01 Financial Statements and Exhibits.
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(d) Exhibits<br><br>99.1 Press Release dated November 21, 2008 announcing the Company's third fiscal quarter financial results.<br><br>99.2  Transcript of the November 21, 2008 conference call conducted by the Company.
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	SIGNATURES
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	Pursuant to the requirements of the Securities Exchange Act of 1934, the
	registrant has duly caused this report to be signed on its behalf by the
	undersigned hereunto duly authorized.
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	Kirkland's, Inc.
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	&nbsp;&nbsp;
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	November 24, 2008
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<I>
	By:
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<I>
	/s/ W. Michael Madden
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	&nbsp;
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<I>
	Name: W. Michael Madden
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	Title: Senior Vice President and Chief Financial Officer
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	Exhibit&nbsp;Index
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	Exhibit No.
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	Description
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	99.1
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	&nbsp;
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<FONT SIZE="2">
Press Release dated November 21, 2008 announcing the Company's third fiscal quarter financial results
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	99.2
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	&nbsp;
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Transcript of November 21, 2008 conference call conducted by the Company
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<BODY style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt"><FONT style="font-size: 22pt">News Release
</FONT>

<P align="left" style="font-size: 22pt"><FONT style="font-size: 11.5pt">Contact: W. Michael Madden
</FONT>


<P align="left" style="margin-left:4%; font-size: 11.5pt; text-indent: 4%">Senior Vice President &#038; CFO



<P align="left" style="margin-left:4%; font-size: 11.5pt; text-indent: 4%">(615)&nbsp;872-4995


<P align="center" style="font-size: 11.5pt"><FONT style="font-size: 12.5pt"><B>KIRKLAND&#146;S REPORTS THIRD QUARTER RESULTS</B></FONT><BR>
<FONT style="font-size: 12pt"><I>Comparable Store Sales Increase 1.2%</I></FONT>



<P align="left" style="font-size: 12pt"><FONT style="font-size: 11pt">JACKSON, Tenn. (November&nbsp;21, 2008) &#151; Kirkland&#146;s, Inc. (NASDAQ: KIRK) today reported financial
results for the 13-week and 39-week periods ended November&nbsp;1, 2008.
</FONT>

<P align="left" style="font-size: 11pt">Net sales for the 13-week period ended November&nbsp;1, 2008, were $85.9&nbsp;million compared with $88.7
million for the 13-week period ended November&nbsp;3, 2007. Comparable store sales for the third
quarter of fiscal 2008 increased 1.2% compared with a 12.1% decrease in the third quarter of fiscal
2007. Comparable store sales in mall stores increased 2.2% for the third quarter, and comparable
store sales in off-mall stores increased 0.8%. The Company closed 3 stores during the quarter to
end the period with 321 stores, compared with 354 stores at the end of the prior-year quarter.


<P align="left" style="font-size: 11pt">Net sales for the 39-week period ended November&nbsp;1, 2008, were $257.6&nbsp;million compared with $258.4
million for the 39-week period ended November&nbsp;3, 2007. Comparable store sales for the 39-week
period ended November&nbsp;1, 2008, increased 2.7% compared with a 13.8% decrease in the prior-year
period. During the 39-week period ended November&nbsp;1, 2008, comparable store sales in mall stores
increased 6.2% while comparable store sales in off-mall stores increased 1.1%.


<P align="left" style="font-size: 11pt">The Company reported a net loss of $1.5&nbsp;million, or $0.07 per diluted share, for the 13-week period
ended November&nbsp;1, 2008, compared with a net loss of $10.7&nbsp;million, or $0.55 per diluted share, in
the 13-week period ended November&nbsp;3, 2007. The prior-year period included a pre-tax severance
charge of $965,000, or $0.04 per share, related to corporate staff reductions, and pre-tax expenses
of approximately $446,000, or $0.02 per share, related to the opening of the Company&#146;s sales
support office in Nashville, Tennessee.


<P align="left" style="font-size: 11pt">The Company also completed the sale of its former corporate headquarters building and land in
Jackson, Tennessee in October for net proceeds of $2.8&nbsp;million.


<P align="left" style="font-size: 11pt">Robert Alderson, Kirkland&#146;s President and Chief Executive Officer, said, &#147;Building on comparable
store sales and margin improvement in the first two quarters of the year, we are pleased to
announce positive comparable store sales and strong merchandise margins again in the third quarter.
We began and ended the quarter with clean inventories. We were able to generate solid results
despite some challenges in September from the hurricane impact in the greater Houston area and
resulting fuel prices and supply shortages, as well as the well-documented deterioration in the
financial markets in October that eroded consumer confidence.


<P align="left" style="font-size: 11pt">&#147;Our confidence in Kirkland&#146;s and our ability to continue executing our strategic plan was
demonstrated during the quarter through the purchase by several members of our Board of Directors
and senior management team of 3.8&nbsp;million shares of the Company&#146;s common stock from our former
private equity


<P align="center" style="font-size: 11pt">-MORE-</FONT><BR>
<FONT style="font-size: 10pt">431 Smith Lane &#166; Jackson, Tennessee 38301 &#166; (731)&nbsp;988-3600</FONT>



<P align="left" style="font-size: 10pt"><FONT style="font-size: 11pt">KIRK Reports Third Quarter Results
<BR>
Page 2
<BR>
November&nbsp;21, 2008
</FONT>

<P align="left" style="font-size: 11pt">partner. Our goal for fiscal 2008 has been to deliver year-over-year improvement in results each
quarter, and we are on track to do so. We also continued to make progress on improving our
liquidity. We completed the sale of the former headquarters building and did not access our credit
line during the quarter, positioning us to end the year with a solid balance sheet and a much
improved cash position.&#148;


<P align="left" style="font-size: 11pt"><I>Investor Conference Call and Web Simulcast</I>
<BR>
Kirkland&#146;s will host a conference call today, at 11:00&nbsp;a.m. ET to discuss its results of operations
for the third quarter of fiscal 2008. The number to call for this interactive teleconference is
(303)&nbsp;262-2053. A replay of the conference call will be available through November&nbsp;28, 2008, by
dialing (303)&nbsp;590-3000 and entering the confirmation number, 11120328#.


<P align="left" style="font-size: 11pt">The live broadcast of Kirkland&#146;s quarterly conference call will be available online at the
Company&#146;s website, <U>www.kirklands.com</U>, or at
<U>http://www.videonewswire.com/event.asp?id=50491</U> on November&nbsp;21, 2008, beginning at
11:00&nbsp;a.m. ET. The online replay will follow shortly after the call and continue for one year.


<P align="left" style="font-size: 11pt">Kirkland&#146;s, Inc. was founded in 1966 and is a specialty retailer of home d&#233;cor in the United
States.&nbsp; Although originally focused in the Southeast, the Company has grown beyond that region and
currently operates 321 stores in 34 states.&nbsp; The Company&#146;s stores present a broad selection of
distinctive merchandise, including framed art, mirrors, candles, lamps, picture frames, accent
rugs, garden accessories and artificial floral products.&nbsp; The Company&#146;s stores also offer an
extensive assortment of gifts, as well as seasonal merchandise.&nbsp; More information can be found at
<U>www.kirklands.com</U>.


<P align="left" style="font-size: 11pt"><I>Except for historical information contained herein, the statements in this release are
forward-looking and made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and
uncertainties, which may cause Kirkland&#146;s actual results to differ materially from forecasted
results. Those risks and uncertainties include, among other things, the competitive environment in
the home d&#233;cor industry in general and in Kirkland&#146;s specific market areas, inflation, product
availability and growth opportunities, seasonal fluctuations, and economic conditions in general.
Those and other risks are more fully described in Kirkland&#146;s filings with the Securities and
Exchange Commission, including the Company&#146;s Annual Report on </I><I>Form 10-K</I><I> filed on May&nbsp;1, 2008.
Kirkland&#146;s disclaims any obligation to update any such factors or to publicly announce results of
any revisions to any of the forward-looking statements contained herein to reflect future events or
developments.</I>


<P align="center" style="font-size: 11pt">-MORE-



<P align="left" style="font-size: 11pt">KIRK Reports Third Quarter Results
<BR>
Page 3
<BR>
November&nbsp;21, 2008


<P align="left" style="font-size: 11pt">KIRKLAND&#146;S, INC.
<BR>
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
<BR>
(dollars in thousands, except per share amounts)

<DIV align="center">
<TABLE style="font-size: 11pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">13 Week Period Ended</TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">November 1,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">November 3</TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2007</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">85,878</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">88,743</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cost of sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,980</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,625</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,763</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Operating expenses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Other operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,461</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,121</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,685</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,862</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Nashville relocation expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">446</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Store impairment charge</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">965</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Operating loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,521</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,631</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">210</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(16</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other expense (income)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(34</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Loss before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,584</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,807</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Income tax expense (benefit)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(113</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,843</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:50px; text-indent:-10px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1,471</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(10,650</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Loss per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.07</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.55</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.07</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.55</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Shares used to calculate loss per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,634</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,525</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,634</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,525</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 11pt">-MORE-



<P align="left" style="font-size: 11pt">KIRK Reports Third Quarter Results
<BR>
Page 4
<BR>
November&nbsp;21, 2008


<P align="left" style="font-size: 11pt">KIRKLAND&#146;S, INC.
<BR>
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
<BR>
(dollars in thousands, except per share amounts)

<DIV align="center">
<TABLE style="font-size: 11pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">39 Week Period Ended</TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">November 1,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">November 3,</TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2007</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">257,639</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">258,416</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cost of sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">174,237</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">187,611</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83,402</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,805</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Operating expenses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Other operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,291</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,204</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,841</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,744</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Store impairment charges</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">352</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">813</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Nashville relocation expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,208</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Severance charge</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">965</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Operating loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,082</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(31,129</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">394</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(63</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(180</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(291</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(65</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Loss before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,821</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(31,278</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Income tax benefit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(104</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,882</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:50px; text-indent:-10px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(5,717</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(27,396</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Loss per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.29</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1.40</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.29</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1.40</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Shares used to calculate loss per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,621</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,503</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,621</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,503</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 11pt">-MORE-



<P align="left" style="font-size: 11pt">KIRK Reports Third Quarter Results
<BR>
Page 5
<BR>
November&nbsp;21, 2008


<P align="left" style="font-size: 11pt"><FONT style="font-size: 12pt">KIRKLAND&#146;S, INC.
<BR>
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
<BR>
(dollars in thousands)
</FONT>
<DIV align="center">
<TABLE style="font-size: 11pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="61%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">November 1, 2008</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">February 2, 2008</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">November 3, 2007</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">ASSETS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Current assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,020</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,820</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">316</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Inventories, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,773</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,246</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,778</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,645</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,868</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,223</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,934</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,317</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Property and equipment, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,726</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67,386</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other long-term assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">827</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,196</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,223</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">113,991</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">122,132</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">146,926</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">LIABILITIES AND SHAREHOLDERS&#146; EQUITY</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Revolving line of credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">20,813</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,826</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,786</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,157</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,197</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,566</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,318</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,352</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68,288</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Deferred rent and other long-term
liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,790</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,379</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,813</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79,562</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">105,667</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,178</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,570</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,259</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total liabilities and shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">113,991</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">122,132</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">146,926</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 11pt"><FONT style="font-size: 12pt">-MORE-</FONT>



<P align="left" style="font-size: 12pt"><FONT style="font-size: 11.5pt">KIRK Reports Third Quarter Results
<BR>
Page 6
<BR>
November&nbsp;21, 2008
</FONT>

<P align="left" style="font-size: 11.5pt"><FONT style="font-size: 12pt">KIRKLAND&#146;S, INC.
<BR>
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<BR>
(dollars in thousands)
</FONT>
<DIV align="center">
<TABLE style="font-size: 11pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">39 Week Period Ended</TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">November 1, 2008</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">November 3, 2007</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net cash provided by (used in):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(5,442</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(34,132</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,573</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(11,791</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,881</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Cash and cash equivalents:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Net decrease</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(3,800</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(25,042</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,820</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,358</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">End of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,020</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">316</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
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</TABLE>
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<P align="left" style="font-size: 10pt"><FONT style="font-size: 9pt"><B>CORPORATE PARTICIPANTS</B>
</FONT>

<P align="left" style="font-size: 9pt"><FONT style="font-size: 8pt"> <B>Tripp Sullivan</B>
</FONT>

<P align="left" style="font-size: 8pt"><I>Corporate Communications &#151; IR</I>


<P align="left" style="font-size: 8pt"><B>Robert Alderson</B>


<P align="left" style="font-size: 8pt"><I>Kirkland&#146;s &#151; President and CEO</I>


<P align="left" style="font-size: 8pt"><B>Mike Madden</B>


<P align="left" style="font-size: 8pt"><I>Kirkland&#146;s &#151; SVP and CFO</I>


<P align="left" style="font-size: 8pt"><FONT style="font-size: 9pt"><B>CONFERENCE CALL PARTICIPANTS</B>
</FONT>

<P align="left" style="font-size: 9pt"><FONT style="font-size: 8pt"> <B>Neely Tamminga</B>
</FONT>

<P align="left" style="font-size: 8pt"><I>Piper Jaffray &#151; Analyst</I>


<P align="left" style="font-size: 8pt"><B>David Magee</B>


<P align="left" style="font-size: 8pt"><I>SunTrust Robinson Humphrey &#151; Analyst</I>


<P align="left" style="font-size: 8pt"><FONT style="font-size: 9pt"> <B>PRESENTATION</B>
</FONT>

<P align="left" style="font-size: 9pt"><FONT style="font-size: 8pt"><B>Operator</B>
</FONT>

<P align="left" style="font-size: 8pt">Good day, everyone, and welcome to the Kirkland&#146;s, Inc., conference call. Today&#146;s call is
being recorded.


<P align="left" style="font-size: 8pt">At this time, for opening remarks and introductions, I would like to turn the call over to Mr.
Tripp Sullivan of Corporate Communications. Please go ahead, sir.


<P align="left" style="font-size: 8pt"><B>Tripp Sullivan </B><B><I>- Corporate Communications &#151; IR</I></B>


<P align="left" style="font-size: 8pt">Thank you. Good morning and welcome to this Kirkland&#146;s, Inc., conference call to review the
Company&#146;s results for the third quarter of fiscal 2008. On the call this morning are Robert
Alderson, President and Chief Executive Officer; and Mike Madden, Senior Vice President and Chief
Financial Officer.


<P align="left" style="font-size: 8pt">The results as well as notice of the accessibility of this conference call on a listen-only basis
over the Internet were released earlier this morning in a press release that has been covered by
the financial media. Except for historical information discussed during this conference call, the
statements made by Company Management are forward-looking and made pursuant to the Safe Harbor
provisions of the Private Securities Litigation Reform Act of 1995.


<P align="left" style="font-size: 8pt">Forward-looking statements involve known and unknown risks and uncertainties which may cause
Kirkland&#146;s actual results in future periods to differ materially from forecasted results. Those
risks and uncertainties are more fully described in Kirkland&#146;s filings with the Securities and
Exchange Commission, including the Company&#146;s annual report on Form 10-K filed on May&nbsp;1, 2008.


<P align="left" style="font-size: 8pt">With that said, I will turn the call over to you, Robert.


<P align="left" style="font-size: 8pt"><B>Robert Alderson </B><B><I>- Kirkland&#146;s &#151; President and CEO</I></B>


<P align="left" style="font-size: 8pt">Good morning, everyone. We appreciate you joining us today.


<P align="left" style="font-size: 8pt">For the third quarter we are pleased to report a continuation of the improved sales trends and
earnings performance we experienced in the first half. We continued our first-half comp improvement
with another positive result in the third quarter, despite the impacts from Hurricane Ike and a
deteriorating economic situation.


<P align="left" style="font-size: 8pt">Like the first half, the third-quarter performance featured higher merchandise margins and lower
operating expenses. Improvement in operating performance combined with the sale of our former
headquarters building further strengthened our financial position.


<P align="left" style="font-size: 8pt">Mike will now walk you through the third-quarter financial results, and I will follow up with some
additional remarks. Mike?


<P align="left" style="font-size: 8pt"><B>Mike Madden </B><B><I>- Kirkland&#146;s &#151; SVP and CFO</I></B>


<P align="left" style="font-size: 8pt">Good morning, everyone.


<P align="left" style="font-size: 8pt">For the third quarter ended November&nbsp;1, 2008, we reported a net loss of $1.5&nbsp;million, or $0.07 per
share, as compared to a net loss of $10.7&nbsp;million, or $0.55 per share, in the prior-year quarter.


<P align="left" style="font-size: 8pt">Net sales for the quarter decreased 3.2% to $85.9&nbsp;million from $88.7&nbsp;million for the prior year.
Comparable store sales increased 1.2% for the quarter. During the quarter we operated with 31 fewer
stores on average than the prior year, or a 9% decrease. Comp sales increased 2.2% in our mall
stores and 0.8% in our off-mall stores.


<P align="left" style="font-size: 8pt">The comp sales increase was driven by an increase in the average ticket, partially offset by a
decline in the number of transactions. The average ticket was up 4%, reflecting an increase in
items per transaction, partly offset by a decrease in the average retail selling price.
Transactions decreased 2.8%, reflecting a slight decrease in traffic counts and flat conversion
rates.


<P align="left" style="font-size: 8pt">Sales were impacted during September by hurricanes, particularly in the Houston area. We estimate
lost sales from the hurricanes to be approximately $350,000, or 40 basis points, in comp sales for
the quarter. Based on a normal flow-through, we estimate the impact on earnings was only about
$0.01 per share.


<P align="left" style="font-size: 8pt">The high-volume geographic area with the strongest comps was Texas, offset by weaker comps in
Florida and Arizona. Merchandising categories performing strongest were art, lamps, and furniture,
each with strong sell-through and improved margin.


<P align="left" style="font-size: 8pt">In real estate we opened three stores during the quarter. At the end of the quarter &#151; we closed
three stores during the quarter &#151; pardon me. At the end of the quarter we operated 321 stores, 213
off-mall stores and 108 mall stores, representing a 66% off-mall/34% mall venue distribution. Total
square footage under lease decreased 7.1% versus the prior-year quarter, while total store units
declined by 9%.


<P align="left" style="font-size: 8pt">Gross profit margin for the quarter increased to 33.3% of sales from 27.9% in the prior year. The
components of reported gross profit margin were as follows. Merchandise margin increased 400 basis
points as a percentage of sales as a result of strong sell-through of new merchandise resulting in
fewer markdowns. Promotional activity was light and confined to planned item promotions targeted to
weekend traffic.


<P align="left" style="font-size: 8pt">Store occupancy costs decreased 150 basis points as a percentage of sales, primarily the result of
the closing of underperforming stores as well as favorable lease renewals and extensions. The
continued shift of the store base to less costly off-mall locations also helped the ratio.


<P align="left" style="font-size: 8pt">Central distribution costs increased 10 basis points as a percentage of sales, as a result of a
decreased revenue base. Freight costs were flat as a percentage of sales as compared to the
prior-year quarter.


<P align="left" style="font-size: 8pt">Operating expenses for the quarter were $25.5&nbsp;million, or 29.6% of sales, as compared to $27.1
million, or 30.6% of sales, for the prior year. Within this line item, at the store level,
operating expenses decreased 70 basis points as a percentage of sales for the quarter. This
improvement was primarily the result of a reduction in advertising expenses. At the corporate
level, the expense ratio decreased 30 basis points as compared to the prior-year quarter.


<P align="left" style="font-size: 8pt">Prior-year results included $446,000 in expenses associated with the opening of our national office
and $965,000 in severance charges related to personnel restructuring, which together amounted to
$0.06 per share.


<P align="left" style="font-size: 8pt">Depreciation and amortization was flat as a percentage of sales, reflecting a reduction in capital
expenditures offset by the acceleration of depreciation on planned store closings.


<P align="left" style="font-size: 8pt">Net interest expense was lower than the prior-year quarter, reflecting high borrowing levels in the
prior year. We have not borrowed from our line of credit thus far in 2008, nor do we anticipate any
borrowings for the remainder of the fiscal year.


<P align="left" style="font-size: 8pt">The sale of our former corporate headquarters building announcing in this morning&#146;s release
resulted in a small loss on sale, which is included within the other expense line item on the
statement of operations.


<P align="left" style="font-size: 8pt">Similar to last quarter, there was no income tax benefit recorded for the quarter as a result of
the valuation allowance on our deferred tax assets and our cumulative losses in recent annual
periods. The benefit of $113,000 recorded during the quarter related to adjustments to our
liability for uncertain tax positions required by accounting standards. In the prior-year quarter,
we recorded in income tax expense of $1.8&nbsp;million, or $0.09 per share.


<P align="left" style="font-size: 8pt">Turning to the balance sheet, inventories at quarter end were $58.8&nbsp;million, or $183,000 per store,
as compared to $62.8&nbsp;million, or $177,000 per store, a year ago. The per-store increase was
primarily the result of heavy receipts in the last week of the quarter that were originally planned
for the first week of the fourth quarter.


<P align="left" style="font-size: 8pt">Looking at inventories on a per-square-foot basis, they were flat compared to the prior year. We&#146;re
comfortable with these levels of inventory entering the fourth quarter and believe the merchandise
mix is fresh and current. We plan to end the fiscal year with inventory levels in the range of $39
million to $41&nbsp;million, which would put us equal to or slightly higher on a per-store basis when
compared with the prior year.


<P align="left" style="font-size: 8pt">At the end of the quarter we had $2&nbsp;million in cash and no borrowings outstanding under our
revolving credit line. That&#146;s a dramatic improvement from a year ago, when we ended the third
quarter with borrowings outstanding of $20.8&nbsp;million. As of the end of the quarter, total
availability under the credit line was $45&nbsp;million.


<P align="left" style="font-size: 8pt">Capital expenditures were $268,000 for the quarter, mainly consisting of information technology and
other maintenance CapEx projects. As mentioned in our press release, we closed on the sale of the
former corporate headquarters building during October, and that sale resulted in net cash proceeds
of approximately $2.8&nbsp;million received during the quarter. For the full fiscal year we expect
capital expenditures to be approximately $3&nbsp;million. Net of landlord allowances, our capital
expenditures are expected to total approximately $2&nbsp;million for the year.


<P align="left" style="font-size: 8pt">Looking forward to the fourth quarter, we&#146;re expecting significant year-over-year improvement in
our earnings performance. We&#146;re cautiously optimistic about our merchandise and our plans for store
execution for the holiday season, despite the travail in the marketplace.


<P align="left" style="font-size: 8pt">Sales trends in November to date would suggest a continuation of our year-to-date trend, but we&#146;re
very early in the quarter, with Black Friday and several major traffic weeks still to come. Also
the effect of the Thanksgiving calendar shift restricts our visibility.


<P align="left" style="font-size: 8pt">Before turning it back over to Robert, I&#146;ll provide an update on some of the financial initiatives
that we have previously reported.


<P align="left" style="font-size: 8pt">As it relates to store activity, we have completed our store openings for 2008, opening a total of
three stores. We evaluated some additional locations for late 2008 openings but have determined
that those will fall in the first quarter of 2009. We will increase our opening activity in 2009
but will remain focused exclusively on relocations of stores in proven markets.


<P align="left" style="font-size: 8pt">We continue to pursue closings of unproductive stores and take advantage of lease expirations and
kick-out opportunities, where appropriate. During the third quarter we closed three stores. The
current expectation for additional closings in the fourth quarter is around 20 to 25 stores,
heavily weighted toward January. This would amount to total closing for fiscal 2008 in the range of
37 to 42 stores.


<P align="left" style="font-size: 8pt">As stated previously and in our release, we closed on the sale of the building in October. Combined
with the sale of the corporate airplane earlier this year, we received net cash proceeds of
approximately $3.7&nbsp;million during the year through the sales of these two assets.


<P align="left" style="font-size: 8pt">And also as previously reported, we collected in income tax refund of $2.8&nbsp;million earlier this
year, representing the carryback of a portion of last year&#146;s loss to recover prior-year taxes paid.
The remainder of our 2007 tax loss will be carried forward to future years. Consequently, this net
operating loss carryforward will serve to offset any taxable income generated in fiscal 2008.


<P align="left" style="font-size: 8pt">The third-quarter results have further strengthened our balance sheet position. We now don&#146;t expect
any borrowings under our credit facility this fiscal year, which positions us well to achieve a
greatly improved cash position at the end of the fiscal year as compared to the prior year.


<P align="left" style="font-size: 8pt">Now I&#146;ll turn it back over to Robert.


<P align="left" style="font-size: 8pt"><B>Robert Alderson </B><B><I>- Kirkland&#146;s &#151; President and CEO</I></B>


<P align="left" style="font-size: 8pt">Given the tumultuous events marking the third quarter, we&#146;re truly pleased to be able to
report a third consecutive quarter of positive comparable sales and strong improvement in earnings
performance versus the prior-year period.


<P align="left" style="font-size: 8pt">August started the quarter off with strong comp sales and margin improvement despite a summer spike
in oil prices that affected some segments of the consuming market.


<P align="left" style="font-size: 8pt">September was notable for hurricanes, especially in our important Houston market, which impacted
earnings slightly. Hurricanes happen, and we typically recover in short order, as happened here.
But resulting refinery closures and gas production slowdowns contributed to gasoline price spikes
and actual fuel shortages in some of our strongest markets. Despite this, our stores continued to
perform relatively well.


<P align="left" style="font-size: 8pt">October presented a financial market meltdown of historic proportions. The combination over a
relatively short period of time of housing slowdowns, credit issues, and devaluation in the housing
markets, a rapid run-up in the price of oil and other energy sources, and finally, the financial
market meltdown combined to rock the economy and jolt consumer confidence.


<P align="left" style="font-size: 8pt">Kirkland&#146;s was and is impacted by those systemic shocks, but our business remained relatively
stable throughout the quarter. I think the best explanation for the lessened impact is that we had
done much of our preparation work for tough times well in advance of this economic perfect storm.
We had worked very hard for a year to prepare our merchandise offering both as to content and
price, and to reposition with our customer base in our historical role of a high-value retailer so
that our traffic conversion and other transactional metrics remained reasonably stable.


<P align="left" style="font-size: 8pt">Most importantly, our relentless focus on merchandise gross margin improvement has allowed us to
continue to strongly improve our earnings performance even in a less than robust sales environment.


<P align="left" style="font-size: 8pt">Our three-year effort at improving our real estate base has begun to bear real fruit in the form of
reduced expenses, especially in rent, with even better news to come next year as closure of a large
group of unproductive stores occurs in late January through the first half of 2009.


<P align="left" style="font-size: 8pt">Stringent and disciplined expense control is already firmly in place. All of these initiatives have
helped us work towards a greatly improved balance sheet and liquidity position and put the Company
in position to return to profitability this year.


<P align="left" style="font-size: 8pt">So given the conditions existing with historically low levels of consumer confidence, an uncertain
political environment, continued tight credit markets, an unraveling of financial institutions, and
depressed real estate activity, how are we doing so far in the fourth quarter?


<P align="left" style="font-size: 8pt">The good news is that the first 20&nbsp;days of November are pretty much on plan, which is very
encouraging. The fact that we are very early in the quarter before Thanksgiving weekend and facing
a calendar shift mitigates reasonable certainty as to our outlook for the full quarter. Product
gross margin continues to be strong but may be restrained somewhat later in the quarter by
promotional needs if the season stalls significantly in our stores due to customer reticence on
holiday spending.


<P align="left" style="font-size: 8pt">Our risk as to product gross margin has been mitigated by a couple of things. First, as we&#146;ve
mentioned, we entered the quarter in a very clean inventory position. Second, we were already
prepared with well-bought merchandise, enabling us to offer great prices and promote as necessary
during what will undoubtedly be a highly promotional holiday period.


<P align="left" style="font-size: 8pt">Our seasonal merchandise in Halloween and Harvest performed extremely well during the third quarter
with an on-time exit, strong sell-throughs, and very good margins. Christmas seasonal merchandise
started more slowly, but it has accelerated in the past three weeks so that we now expect it to
perform at or close to plan, given our current experience.


<P align="left" style="font-size: 8pt">A very important lift in business has been provided by a sizable component of value-priced, mostly
impulse, giftable items we added to the mix this year to supplement fourth-quarter sales. These
items have provided strong support by lifting items per transaction and average ticket, and will
deliver good margin performance.


<P align="left" style="font-size: 8pt">Mike mentioned that we intended to open more stores in 2009. We&#146;re committed at this moment to a
limited number of deals and will open only as many as we deem prudent under the circumstances.
These stores will virtually all represent off-mall replacements of strong mall stores that have
reached the end of the applicable lease. Our experience with these situations has shown us that
developing the new stores will hardly impact our capital expenditure and almost unfailingly produce
significantly higher sales and lower occupancy-related expenses, resulting in more profit.


<P align="left" style="font-size: 8pt">That said, we will pay very close attention to the real estate market in the level of our business
as we enter and proceed through 2009, and adjust our store-opening plan as necessary.


<P align="left" style="font-size: 8pt">So far, so good. We have no special visibility into the remainder of the fourth quarter because the
customer is stressed by so many factors, and the economic climate is marked by uncertainty. But
what we do have is a well-positioned and prepared Company to weather the storm and to produce
strong financial results. We have the ability to and will react to market conditions as needed.


<P align="left" style="font-size: 8pt">We look forward to reporting to you on the results of the season in a few weeks. Thanks for your
time and interest.


<P align="left" style="font-size: 8pt">Operator, Mike and I are now available for questions from our listeners.


<P align="left" style="font-size: 8pt"><FONT style="font-variant: SMALL-CAPS"> </FONT><FONT style="font-size: 9pt"></FONT><B>QUESTION AND ANSWER</B>
</FONT>

<P align="left" style="font-size: 9pt"><FONT style="font-size: 8pt"><B>Operator</B>
</FONT>

<P align="left" style="font-size: 8pt">(Operator instructions) Neely Tamminga, Piper Jaffray.


<P align="left" style="font-size: 8pt"><B>Neely Tamminga </B><B><I>- Piper Jaffray &#151; Analyst</I></B>


<P align="left" style="font-size: 8pt">Kind of a philosophical question here because just what you guys are doing is so commendable
right now in this environment, and I think the results speak to themselves. So keep doing what you
are doing there.


<P align="left" style="font-size: 8pt">But just at what point do you decide to turn on the spigot of spending on talent acquisition,
opportunities, inventory, new category growth? Clearly, you guys are actually gaining share by
being &#091;comp&#146;ing&#093; positive. Where do you think you are taking these people from, and what more do
you think you can do for them? And when do you do that? Do you wait for the environment to actually
improve, or do you actually capitalize on some of these opportunities while everybody else is quite
weak?


<P align="left" style="font-size: 8pt"><B>Robert Alderson </B><B><I>- Kirkland&#146;s &#151; President and CEO</I></B>


<P align="left" style="font-size: 8pt">Well, I think &#151; and I&#146;ll speak philosophically. I think there is not exactly an answer to
this. I think you continue to feel your way through this environment. And our instinct at the
moment is we don&#146;t know how deep the lake is, so we remain, I think, reasonably cautious about
spending and expansion. I think the way that we&#146;re approaching the new units that we intend to add
next year is reflective of that philosophy.


<P align="left" style="font-size: 8pt">On the talent side, we are trying to make sure that we keep our Company sized for the level of
business that we are doing. At the moment, I don&#146;t think we&#146;re particularly behind the curve with
respect to people or systems or anything that we need to add to the mix. Downstream we certainly
will improve our technology, and we&#146;ll certainly add people as necessary. I&#146;d like to be a little
deeper in the merchandising group right now. And we&#146;ll address that as appropriately &#151; as
appropriate.


<P align="left" style="font-size: 8pt">But I think right now &#151; I think caution is the word. I think we&#146;d like to see a little
stabilization in the economic environment before we do anything unusual.


<P align="left" style="font-size: 8pt"><B>Neely Tamminga </B><B><I>- Piper Jaffray &#151; Analyst</I></B>


<P align="left" style="font-size: 8pt">Sounds great. Good luck.


<P align="left" style="font-size: 8pt"><B>Operator</B>


<P align="left" style="font-size: 8pt">David Magee, SunTrust Robinson Humphrey.


<P align="left" style="font-size: 8pt"><B>David Magee </B><B><I>- SunTrust Robinson Humphrey &#151; Analyst</I></B>


<P align="left" style="font-size: 8pt">Just a question about maybe drilling down to the improvement that you&#146;re seeing on the
merchandising side. It&#146;s my impression that you are taking a &#151; department by department within the
store and working to improve it. Can you talk a little bit about which departments you have really
seen the most success with, and what your biggest opportunity may be for the next couple of
quarters in terms of those same efforts?


<P align="left" style="font-size: 8pt"><B>Robert Alderson </B><B><I>- Kirkland&#146;s &#151; President and CEO</I></B>


<P align="left" style="font-size: 8pt">Sure. When this new team took over sort of the September/October frame a year ago, we really
started on a very systematic approach of trying to repair categories of business and trying to take
a bite of this as something that we could handle. The first place for us to look was on the wall,
and I think we&#146;ve done a terrific job in repairing our art business. And it has certainly been a
leader both in sales, in producing gross margin dollars, and producing a good margin. And I think
that&#146;s been a great success.


<P align="left" style="font-size: 8pt">We&#146;ll actually work really hard on the remaining components of the wall as we go into 2009 because
we think we have opportunity there, specifically in mirrors and wall decor, the alternative side of
it.


<P align="left" style="font-size: 8pt">We also made a big commitment to returning our lamp business to profitability after three years of
not doing so well with it, and we&#146;ve done a really good job with that. We are very happy about how
we are positioned in that category and what it can do for us going forward.


<P align="left" style="font-size: 8pt">Furniture was the same situation. We needed to repair that. We&#146;ll have a &#151; we&#146;ve had a big effort
there, and it&#146;s resulted in a really good results.


<P align="left" style="font-size: 8pt">We worked really hard on textiles, and that&#146;s something that we expect to be a much better margin
performer in 2009 and to present a really nice offering to our customer and something that will
help our business.


<P align="left" style="font-size: 8pt">We&#146;re shown improvement this year in the lighting and candle side of the business, and we think
there&#146;s still big opportunity there.


<P align="left" style="font-size: 8pt">Dec access has been very steady for us throughout the year, and the seasonal side of our business
has been very helpful in the third quarter, and we expect it to be throughout the fourth quarter.


<P align="left" style="font-size: 8pt">So we have opportunities yet to improve our merchandising both in gross margin and sales, and we
are very systematically approaching that and doing what we can as fast as we can to get it all
working together.


<P align="left" style="font-size: 8pt"><B>David Magee </B><B><I>- SunTrust Robinson Humphrey &#151; Analyst</I></B>


<P align="left" style="font-size: 8pt">Obviously, there has been a lot of noise in the marketplace, which you have articulated well
in your remarks, Robert, but specifically on the gas price pullback here of late, are you seeing
any meaningful uptick in terms of customer behavior from that factor alone?


<P align="left" style="font-size: 8pt"><B>Robert Alderson </B><B><I>- Kirkland&#146;s &#151; President and CEO</I></B>


<P align="left" style="font-size: 8pt">We really didn&#146;t. In the summer when prices &#151; when oil spiked and the upped price in gas
began to affect the economy, we really didn&#146;t see a lot of negative effect from that. Our traffic
in basically the whole business was improving pretty nicely through August. We had seen traffic
that started out the year negative; actually, it worked its way to the point where it was positive.
We&#146;ve seen continued good conversion, great items-per-transaction performance in our store &#151; a lot
of good things happening up to the month of August.


<P align="left" style="font-size: 8pt">It has just been in the last two months as we have seen sort of a combination of all those things
happening along with the things going on in the economy, both in the credit markets and in the
financial institution situation itself, that seem to affect the customer the most. I really don&#146;t
think that there has been a noticeable reaction in terms of increased traffic or significantly
increased spending as a result of consumers having a little bit more money in their pocket from gas
prices going down. So I think there&#146;s going to be some lag on that.


<P align="left" style="font-size: 8pt">And I think everybody is waiting, really, for a little stability and to feel a &#151; and sort of
breathe a sigh of relief and feel like things are going to be somewhat more normalized going
forward.


<P align="left" style="font-size: 8pt"><B>David Magee </B><B><I>- SunTrust Robinson Humphrey &#151; Analyst</I></B>


<P align="left" style="font-size: 8pt">Yes, I would agree.


<P align="left" style="font-size: 8pt"><B>Operator</B>


<P align="left" style="font-size: 8pt">(Operator instructions) At this time I will turn it back over to Management for any closing
remarks.


<P align="left" style="font-size: 8pt"><B>Robert Alderson </B><B><I>- Kirkland&#146;s &#151; President and CEO</I></B>


<P align="left" style="font-size: 8pt">Thanks for joining us today. We appreciate your interest and look forward to speaking with you
in a few weeks about the fourth quarter. Thank you.


<P align="left" style="font-size: 8pt"><B>Operator</B>


<P align="left" style="font-size: 8pt">Thank you. Ladies and gentlemen, this concludes the Kirkland&#146;s, Inc., conference call. You may
now disconnect. Thank you for using AT&#038;T Conferencing.



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