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<SEC-DOCUMENT>0001299933-09-002332.txt : 20090527
<SEC-HEADER>0001299933-09-002332.hdr.sgml : 20090527
<ACCEPTANCE-DATETIME>20090527111002
ACCESSION NUMBER:		0001299933-09-002332
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	20090521
ITEM INFORMATION:		Results of Operations and Financial Condition
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20090527
DATE AS OF CHANGE:		20090527

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:		09853602

	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_32931.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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<BR>
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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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	May 21, 2009
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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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______________<BR>
	(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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	&nbsp;&nbsp;
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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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	&nbsp;
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___________<BR>
	(Zip Code)
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	Registrant&#146;s telephone number, including area code:
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	&nbsp;
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	731-988-3600
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<FONT SIZE="2">
	Not Applicable
<BR>______________________________________________<BR>
	Former name or former address, if changed since last report
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<FONT SIZE="2">
	&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>
</P>
<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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<B>
	Item 2.02 Results of Operations and Financial Condition.
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On May 21, 2009, Kirkland's Inc. (the "Company") issued a press release and conducted a conference call regarding its sales and earnings results for its first fiscal quarter period ended May 2, 2009 (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 May 21, 2009 announcing the Company's first fiscal quarter financial results.<br><br>99.2  Transcript of the May 21, 2009 conference call conducted by the Company.
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<B>
	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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<I>
	May 27, 2009
</I>
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	&nbsp;
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<I>
	By:
</I>
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	&nbsp;
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<I>
	/s/ W. Michael Madden
</I>
<BR>
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	&nbsp;
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	&nbsp;
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<I>
	Name: W. Michael Madden
</I>
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<I>
	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
</DIV>
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	&nbsp;
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<TD ALIGN="LEFT" VALIGN="TOP" WIDTH="77%">
<FONT SIZE="2">
Press Release dated May 21, 2009 announcing the Company's first fiscal quarter financial results
</FONT>
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	99.2
</DIV>
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<FONT SIZE="2">
	&nbsp;
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Transcript of the May 21, 2009 conference call conducted by the Company.
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<TYPE>EX-99.1
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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 & CFO



<P align="left" style="margin-left:4%; font-size: 11.5pt; text-indent: 4%">(615)&nbsp;872-4800


<P align="left" style="font-size: 11.5pt"><FONT style="font-size: 12.5pt"><B>KIRKLAND&#146;S REPORTS FIRST QUARTER RESULTS</B>
</FONT>

<P align="left" style="font-size: 12.5pt"><FONT style="font-size: 12pt"><B>Highlights:</B>
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 12pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Comparable store sales increase 5.2%</I></TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 12pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Reverses prior-year loss with earnings of $0.17 per diluted share</I></TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 12pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Marks highest first quarter earnings as a public company</I></TD>
</TR>

</TABLE>


<P align="left" style="font-size: 12pt"><FONT style="font-size: 11pt">JACKSON, Tenn. (May&nbsp;21, 2009) &#151; Kirkland&#146;s, Inc. (NASDAQ: KIRK) today reported financial
results for the 13-week period ended May&nbsp;2, 2009.
</FONT>

<P align="left" style="font-size: 11pt">Net sales for the 13-week period ended May&nbsp;2, 2009, were $83.3&nbsp;million compared with $84.1&nbsp;million
for the 13-week period ended May&nbsp;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.


<P align="left" style="font-size: 11pt">The Company reported net income of $3.5&nbsp;million, or $0.17 per diluted share, for the 13-week period
ended May&nbsp;2, 2009, compared with a net loss of $2.6&nbsp;million, or $(0.13) per diluted share, in the
13-week period ended May&nbsp;3, 2008. Income tax expense for the 13-week period ended May&nbsp;2, 2009,
includes a rate benefit of approximately $1.0&nbsp;million, or $0.05 per diluted share, related to the
reversal of a portion of the valuation allowance on the Company&#146;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.


<P align="left" style="font-size: 11pt">Robert Alderson, Kirkland&#146;s President and Chief Executive Officer, said, &#147;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 &#150; particularly in occupancy costs. Additionally, lower inbound
and outbound freight costs had a positive effect on margin during the quarter.


<P align="left" style="font-size: 11pt">&#147;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.&#148;


<P align="center" style="font-size: 11pt">-MORE-<BR>
431 Smith Lane &#150; Jackson, Tennessee 38301 &#150; 731-988-3600



<P align="left" style="font-size: 11pt">KIRK Reports First Quarter Results
<BR>
Page 2
<BR>
May&nbsp;21, 2009


<P align="left" style="font-size: 11pt"><I>Revised Fiscal 2009 Outlook</I>


<P align="left" style="font-size: 11pt">The Company issued its initial targets and expectations for fiscal 2009 in March&nbsp;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.

<DIV align="center">
<TABLE style="font-size: 11pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
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    <TD width="85%">&nbsp;</TD>
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<TR valign="bottom" style="font-size: 11pt">
    <TD align="left" valign="top"><B>Store Base:</B>
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">The Company started fiscal 2009 with 299 stores compared with 335<BR>
stores a year ago. For fiscal 2009, the store base is expected<BR>
to average approximately 30 stores less per quarter than the<BR>
comparable quarters of fiscal 2008. In accordance with the<BR>
Company&#146;s five-year plan to convert its store base to off-mall<BR>
locations, closings from natural lease expirations are expected<BR>
to be approximately 35 to 40 stores with approximately half of<BR>
those closing during the first two quarters of 2009 and the other<BR>
half closing after the holiday season in January&nbsp;2010. New store<BR>
openings are expected to be approximately 15 to 20 stores in<BR>
fiscal 2009 with half of these opening during the first two<BR>
quarters of 2009 and the other half during the third and early<BR>
fourth quarters.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD align="left" valign="top"><B>Net Sales:</B>
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Full year sales are expected to be moderately below fiscal 2008<BR>
based on the smaller store base throughout the year. While early<BR>
second quarter comparable store sales trends continue to be<BR>
positive, future comparable store sales gains are difficult to<BR>
predict in the current environment.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD align="left" valign="top"><B>Margins:</B>
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Full year merchandise and operating margins are expected to be<BR>
moderately above fiscal 2008 levels. Should the economy continue<BR>
to weaken through the year, merchandise margin would most likely<BR>
come under more pressure compared with operating margin, which<BR>
should continue to benefit from lower store occupancy costs and<BR>
lower depreciation expense.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD align="left" valign="top"><B>Earnings:</B>
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Full year pre-tax earnings are expected to be moderately above<BR>
fiscal 2008 levels. The Company&#146;s income tax rate will be<BR>
difficult to model in fiscal 2009 due to the status of the<BR>
remaining valuation allowance on the deferred tax assets and the<BR>
accounting rules that govern the timing of any changes to the<BR>
amount of the valuation allowance. Therefore, operating income<BR>
and pre-tax income will be more relevant measurements of business<BR>
performance in fiscal 2009.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD align="left" valign="top"><B>Cash Flow:</B>
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">The Company expects to generate positive cash flow for the year<BR>
with no borrowings expected on its revolving line of credit.</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<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 first quarter of fiscal 2009. The number to call for this interactive teleconference is
(212)&nbsp;231-2900. A replay of the conference call will be available through May&nbsp;28, 2009, by dialing
(402)&nbsp;977-9140 and entering the confirmation number, 21422971.


<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=58412</U> on May&nbsp;21,&nbsp;2009, beginning at 11:00&nbsp;a.m.
ET. The online replay will follow shortly after the call and continue for one year.


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



<P align="left" style="font-size: 11pt"><FONT style="font-size: 11.5pt">KIRK Reports First Quarter Results
<BR>
Page 3
<BR>
May&nbsp;21, 2009
</FONT>

<P align="left" style="font-size: 11.5pt"><FONT 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 290 stores in 32 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>.
</FONT>

<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 April&nbsp;20, 2009.
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"><FONT style="font-size: 11.5pt">KIRK Reports First Quarter Results
<BR>
Page 4
<BR>
May&nbsp;21, 2009
</FONT>

<P align="left" style="font-size: 11.5pt"><FONT style="font-size: 12pt">KIRKLAND&#146;S, INC.
<BR>
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
<BR>
(dollars in thousands, except per share amounts)
</FONT>
<DIV align="center">
<TABLE style="font-size: 12pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="75%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 12pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>13 Week Period Ended</B></TD>
</TR>
<TR style="font-size: 12pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">May 2,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">May 3,</TD>
</TR>
<TR style="font-size: 12pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2008</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 12pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">83,320</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">84,077</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cost of sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,146</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,169</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: 12pt">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,908</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <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: 12pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Other operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,338</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,051</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,682</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: 12pt">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Operating income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,825</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(31</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <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">(71</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(272</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: 12pt">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Income (loss)&nbsp;before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,061</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,552</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Income tax provision</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">583</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</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: 12pt">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,478</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(2,552</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: 12pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Earnings (loss)&nbsp;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: 12pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.13</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: 12pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.13</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: 12pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Shares used to calculated earnings (loss)&nbsp;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: 12pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,662</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,606</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: 12pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,606</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: 12pt">-MORE-




<P align="center" style="font-size: 10pt; display: none">1
<!-- PAGEBREAK -->




<P align="left" style="font-size: 12pt"><FONT style="font-size: 11.5pt">KIRK Reports First Quarter Results
<BR>
Page 5
<BR>
May&nbsp;21, 2009
</FONT>

<P align="left" style="font-size: 11.5pt"><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">May 2, 2009</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">January 31, 2009</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">May 3, 2008</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">$</TD>
    <TD align="right">31,077</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">36,445</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,668</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">39,018</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,686</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,578</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Prepaid expenses and other current
assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,917</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,191</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,989</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">77,012</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,322</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,235</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">40,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,826</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,208</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">4,308</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,616</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,219</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">121,371</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">126,764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">113,662</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">Current liabilities:</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">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">14,437</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">13,501</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">15,271</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Income taxes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,478</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,349</TD>
    <TD>&nbsp;</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">Accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,578</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,981</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,521</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">36,493</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,831</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,792</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">28,894</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,582</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,785</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">65,387</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,577</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">55,984</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,351</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,085</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">121,371</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">126,764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">113,662</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 First Quarter Results
<BR>
Page 6
<BR>
May&nbsp;21, 2009
</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="65%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&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="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" style="border-bottom: 1px solid #000000">May 2, 2009</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">May 3, 2008</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">$</TD>
    <TD align="right">(3,129</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">260</TD>
    <TD>&nbsp;</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 nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,274</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(433</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">35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</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">$</TD>
    <TD align="right">(5,368</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(152</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">36,445</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,820</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">$</TD>
    <TD align="right">31,077</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,668</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">-END-




<P align="center" style="font-size: 10pt; display: none">2




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<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>3
<FILENAME>exhibit2.htm
<DESCRIPTION>EX-99.2
<TEXT>
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<TITLE> EX-99.2 </TITLE>
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<BODY TEXT="#000000" BGCOLOR="#FFFFFF" ALINK="#0000FF" HLINK="#FF0000" VLINK="#800080">

<BODY style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt"><FONT style="font-size: 10pt">CORPORATE PARTICIPANTS
</FONT>

<P align="left" style="font-size: 10pt">Tripp Sullivan


<P align="left" style="font-size: 10pt">Corporate Communications, Inc. &#151; IR Contact


<P align="left" style="font-size: 10pt">Robert Alderson


<P align="left" style="font-size: 10pt">Kirkland&#146;s, Inc. &#151; President and CEO


<P align="left" style="font-size: 10pt">Mike Madden


<P align="left" style="font-size: 10pt">Kirkland&#146;s, Inc. &#151; SVP and CFO


<P align="left" style="font-size: 10pt">CONFERENCE CALL PARTICIPANTS


<P align="left" style="font-size: 10pt">Chris Rapalje


<P align="left" style="font-size: 10pt">SunTrust Robinson Humphrey &#151; Analyst


<P align="left" style="font-size: 10pt">Brad Leonard


<P align="left" style="font-size: 10pt">BML Capital Management, LLC &#151; Analyst


<P align="left" style="font-size: 10pt">Maria Vizuete


<P align="left" style="font-size: 10pt">Piper Jaffray & Co. &#151; Analyst


<P align="left" style="font-size: 10pt">Keith Curtis


<P align="left" style="font-size: 10pt">Brant Point Capital Management &#151; Analyst


<P align="left" style="font-size: 10pt">PRESENTATION


<P align="left" style="font-size: 10pt">Operator


<P align="left" style="font-size: 10pt">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: 10pt">At this time for opening remarks and introductions, I would like to turn the call over to Mr.&nbsp;Tripp
Sullivan of Corporate Communications. Please go ahead, sir.


<P align="left" style="font-size: 10pt">Tripp Sullivan  &#151; Corporate Communications, Inc. &#151; IR Contact


<P align="left" style="font-size: 10pt">Thank you. Good morning, and welcome to this Kirkland&#146;s, Inc. conference call to review the
Company&#146;s results for the first quarter of fiscal 2009.


<P align="left" style="font-size: 10pt">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: 10pt">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: 10pt">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&nbsp;10K filed on April&nbsp;20, 2009.


<P align="left" style="font-size: 10pt">With that said, I&#146;ll turn the call over to you, Robert.


<P align="left" style="font-size: 10pt">Robert Alderson  &#151; Kirkland&#146;s, Inc. &#151; President and CEO


<P align="left" style="font-size: 10pt">Thanks, Tripp, and good morning, everyone. We appreciate you joining us today.


<P align="left" style="font-size: 10pt">We are pleased to report positive comparable store sales and strong earnings results for the first
quarter of fiscal 2009. This was our first profitable first quarter since 2004, and our best
earnings performance in a first quarter since becoming a public company.


<P align="left" style="font-size: 10pt">The bottom line results were driven by strong improvements in our merchandise and operating margins
versus the prior year. We remain in a very solid financial position, ending the quarter with a cash
balance in excess of $31&nbsp;million, and no debt.


<P align="left" style="font-size: 10pt">Mike Madden, our CFO, will now walk you through the first quarter results and our financial
position. Mike?


<P align="left" style="font-size: 10pt">Mike Madden  &#151; Kirkland&#146;s, Inc. &#151; SVP and CFO


<P align="left" style="font-size: 10pt">Thanks, Robert, and good morning. I&#146;ll start with a review of the first quarter income
statement.


<P align="left" style="font-size: 10pt">For the first quarter ended May&nbsp;2, 2009, we reported net income of $3.5&nbsp;million or $0.17 per
diluted share versus a net loss of $2.6&nbsp;million or $0.13 per diluted share for the prior-year
quarter. Net sales were $83.3&nbsp;million, a 0.9% decrease from $84.1&nbsp;million in the prior-year
quarter.


<P align="left" style="font-size: 10pt">We operated 30 fewer stores on average during the quarter as compared to the prior period. Average
sales per store were up 9.3% versus the first quarter of 2008, and up 19.5% versus the first
quarter of 2007. Comparable store sales increased 5.2% for the quarter. Comps increased 8.2% in our
mall stores and increased 4.2% in our off-mall stores. However, average sales volume in our
off-mall stores was 19% higher than in our mall stores during the first quarter.


<P align="left" style="font-size: 10pt">A higher average ticket drove the comp sales increase. The higher ticket was driven by a strong
increase in the average retail selling price, offset by a small decline in items per transaction.
Transactions were down slightly for the quarter, reflecting a decline in customer conversion rates,
partially offset by a slight increase in customer traffic. These results were consistent between
our mall and off-mall stores.


<P align="left" style="font-size: 10pt">From a geographic standpoint, our best performing area was the south-central part of the country,
including Texas, Louisiana and Mississippi. We also noted improvement in our Midwestern stores. Our
Florida stores showed slightly positive results, but still lagged the overall Company. Our weakest
performing states were Arizona and North Carolina.


<P align="left" style="font-size: 10pt">Merchandise categories performing strongest were decorative accessories, wall decor, frames and
gifts. These results underscore the benefits we have realized from shifting the merchandise mix to
include more gifts and impulse buys.


<P align="left" style="font-size: 10pt">In real estate, we opened three stores and closed 10 stores during the quarter. At the end of the
quarter, we operated 292 stores, 209 off-mall stores, and 83 mall stores, representing a 72%
off-mall, 28% mall venue distribution. Total square footage under lease decreased 9% from the prior
year, while total store units declined by 10%.


<P align="left" style="font-size: 10pt">Gross profit margin for the first quarter increased to 38.6% of sales from 32% in the prior year.
The components of reported gross profit margin were as follows. First, merchandise margin increased
310 basis points as a percentage of sales. Merchandise margins benefited equally from higher
initial markups and lower markdowns. Initial markups increased primarily due to significantly lower
ocean freight costs.


<P align="left" style="font-size: 10pt">The global economic downturn has reduced the demand in US for goods exported from Asia, which has
forced steamship lines to aggressively compete to fill excess capacity on their vessels and protect
market share. Lower bunker fuel costs also helped our initial margins.


<P align="left" style="font-size: 10pt">We also continued to experience strong sellthrough rates in our key merchandise categories,
resulting from improved product selection and a positive reception from our customers. These
factors led to lower markdown rates and provided a fresh merchandise mix throughout the quarter.


<P align="left" style="font-size: 10pt">Secondly, store occupancy costs decreased 240 basis points as a percentage of sales. This decline
resulted from favorable lease renewal terms, comp sales leverage, the closure of underperforming
stores, and our continued shift to less costly but more productive off-mall real estate locations.


<P align="left" style="font-size: 10pt">In connection with the closure of 10 stores during the quarter, we reversed deferred rent
liabilities associated with those stores by $566,000, which also had a favorable impact on the
occupancy ratio.


<P align="left" style="font-size: 10pt">Third, outbound freight costs decreased 100 basis points as a percentage of sales, reflecting a
decline in diesel fuel costs, the shift of two markets to direct-to-store delivery methods, and
leverage from the comp sales increase.


<P align="left" style="font-size: 10pt">Diesel fuel prices, which make up a significant portion of our outbound freight costs, were down
over 40% as compared to the prior-year quarter. Recent trends in fuel prices suggest that we should
expect less of this benefit as the year progresses.


<P align="left" style="font-size: 10pt">Lastly, central distribution costs decreased 10 basis points as a percentage of sales as compared
to the prior-year quarter.


<P align="left" style="font-size: 10pt">Operating expenses for the quarter were $24.3&nbsp;million, or 29.2% of sales as compared to $25.1
million or 29.8% of sales for the prior-year quarter. Operating expenses declined as a percentage
of sales, primarily as a result of comp sales leverage. Operating expenses at the store level
decreased to 90 basis points for the quarter, while corporate operating expenses increased 30 basis
points.


<P align="left" style="font-size: 10pt">Corporate expenses were impacted by higher bonus accruals as compared to the prior-year quarter,
which accounted for all the increase in the ratio.


<P align="left" style="font-size: 10pt">Depreciation and amortization decreased 100 basis points as a percentage of sales, reflecting the
large reduction in capital expenditures during 2008, impairment charges taken in prior periods, and
the decline in the store count in recent fiscal years.


<P align="left" style="font-size: 10pt">Interest and other income totaled $33,000 this quarter as compared to $273,000 in the prior year.
The prior-year results included the sale of our corporate airplane, which resulted in a gain of
$213,000.


<P align="left" style="font-size: 10pt">We recorded income tax expense of $583,000, or 14.4% of pretax income during the quarter, versus
zero tax expense recorded in the prior-year quarter. Based on our first quarter results and our
forecast for the fiscal year, we anticipate generating sufficient pretax profit to allow us to
reverse the remaining valuation allowance that is recorded on our deferred tax assets.


<P align="left" style="font-size: 10pt">Our effective rate of 14.4% for the first quarter takes into account the reversal of a portion of
this valuation allowance. The ultimate effective rate that is recorded for fiscal 2009 will depend
heavily on our operating performance for the remaining three quarters of the year.


<P align="left" style="font-size: 10pt">In the prior year, although we were in a loss position, our tax benefit was limited, due to the
exhaustion of our ability to carry back losses to prior periods. Therefore, no tax benefit was
recorded in the prior-year quarter.


<P align="left" style="font-size: 10pt">Net income for the quarter was $3.5&nbsp;million, or $0.17 per diluted share as compared to a net loss
of $2.6&nbsp;million, or $0.13 per diluted share in the prior-year quarter.


<P align="left" style="font-size: 10pt">Turning to the balance sheet and the cash flow statement, inventories at May&nbsp;2, 2009 were $39
million, or $134,000 per store as compared to $41.6&nbsp;million, or $128,000 per store in the
prior-year quarter. The increase on a per-store basis is primarily due to an increase in average
square footage per store. This level of inventory is consistent with our financial plan, and we
plan to end the second quarter of 2009 with inventory levels in the range of 39&nbsp;million to 41
million.


<P align="left" style="font-size: 10pt">At the end of the quarter, we had $31.1&nbsp;million in cash on hand. The decline in cash from the end
of the year was the result of income tax payments during April&nbsp;2009. No borrowings were outstanding
in our revolving line of credit, and we had net availability under the line of credit of
approximately $21.7&nbsp;million. We do not expect to borrow from our line of credit facility during
fiscal 2009.


<P align="left" style="font-size: 10pt">Accounts Payable levels declined versus the prior year as a result of the reduction in store count
and the related inventory receipt flow. Income taxes payable was $1.5&nbsp;million at the end of the
quarter as compared to zero in the prior year. During the first quarter of 2009, we made income tax
payments of $5.6&nbsp;million. During the prior-year quarter, we received the refunds of $2&nbsp;million.


<P align="left" style="font-size: 10pt">For the quarter, capital expenditures were $2.3&nbsp;million, primarily related to new store
construction and the purchase of new point-of-sale software. The remainder of our capital
expenditures related to the maintenance of our distribution center and our IT infrastructure, and
leasehold improvements to our stores and corporate facilities.


<P align="left" style="font-size: 10pt">The final item I&#146;ll cover before turning it over to Robert is to provide an update on our outlook
for fiscal 2009. Based on current trends in first quarter results, we have updated our outlook for
the fiscal year. This outlook does not account for a further deterioration in the macroeconomic
environment. Should the recession more severely impact consumer spending in our stores during the
upcoming year, we will revise our expectations accordingly.


<P align="left" style="font-size: 10pt">As it relates to store count, our expectations are relatively unchanged. We ended the first quarter
with 292 stores as compared to 325 at the end of the prior-year quarter, a reduction of 33 stores.
For fiscal 2009, we expect to average approximately 30 fewer stores per quarter than the comparable
quarters of 2008.


<P align="left" style="font-size: 10pt">Closings for the year expected to be approximately 35 to 40 stores, with about half of these
occurring in the first two quarters of the year, and the remainder occurring after the holiday
season in January&nbsp;2010.


<P align="left" style="font-size: 10pt">New store openings are expected to be approximately 15 to 20 in fiscal 2009, with about half of
these occurring in the first two quarters of the year, and the other half in the third and early
fourth quarters.


<P align="left" style="font-size: 10pt">Our topline expectations are for total sales to decline moderately from fiscal 2008 due to the
store count decline. As a result of the comparable store sales results to date, we expect
comparable store sales for the full fiscal year to be positive. While extremely early in the second
quarter, comp sales have continued on the first quarter&#146;s trend.


<P align="left" style="font-size: 10pt">Our preparation for Mother&#146;s Day led to strong sales results to start the quarter. However, we note
that the retail environment is still difficult to gauge and predict. We are cautiously optimistic
about the remainder of the year, given the positive trends we have experienced, but remain careful
in what is an unprecedented economic situation.


<P align="left" style="font-size: 10pt">Full-year merchandise and operating margins are expected to be moderately above fiscal 2008 levels.
Should the economy continue to weaken during 2009, merchandise margins would likely come under more
pressure than the operating margin, which should continue to benefit from lower store occupancy
costs and lower depreciation expenses.


<P align="left" style="font-size: 10pt">Because of several holidays and spring clearance in preparation for the fall season, the second
quarter is more promotional. Our semiannual big sale and clearance is held in late June and July,
and we also provide special promotions for Mother&#146;s Day, Memorial Day and the Fourth of July. The
Memorial Day and Fourth of July events also provide additional clearance opportunities.


<P align="left" style="font-size: 10pt">It generally takes a little more promotional activity to generate traffic during the summer months
preceding the back-to-school season. As a result, we expect merchandise margins to be somewhat
lower than those recorded in the first quarter. However, we still expect margins to increase over
the prior year&#146;s second quarter, as we anticipate the benefit from a cleaner merchandise mix and
lower inbound transportation costs for ocean freight, as well as lower outbound transportation
costs from our DC.


<P align="left" style="font-size: 10pt">With these considerations, we expect positive second quarter pretax earnings, but not at the level
achieved in the first quarter.


<P align="left" style="font-size: 10pt">Turning back to the full year, with no significant changes in our operating cost structure and a
decline in depreciation expenses expected throughout the year, we anticipate full-year pretax
earnings to be moderately above the levels of fiscal 2008. As always, fourth quarter performance
heavily impacts our full-year earnings results.


<P align="left" style="font-size: 10pt">Based on these expectations, our full-year effective tax rate is estimated to be 14.4%. This rate
will be adjusted based on the actual operating performance throughout the fiscal year, and
therefore, we&#146;ll provide an update on this each quarter.


<P align="left" style="font-size: 10pt">As we mentioned in the last call, the tax rate is difficult to model in 2009, due to the status of
the valuation allowance on our deferred tax assets, and the accounting rules that govern the timing
of any changes to the amount of the valuation allowance. Therefore, we continue to stress operating
income and pretax income as the most relevant measurements of our business performance in 2009.


<P align="left" style="font-size: 10pt">We expect to be cash flow positive in 2009, with capital expenditures for new store openings and
other infrastructure investments covered by existing cash flows. We do not expect any borrowings on
our line of credit during the year.


<P align="left" style="font-size: 10pt">Total capital expenditures are expected to be in the range of $9&nbsp;million to $10&nbsp;million, which
includes 15 to 20 new store openings. Net of landlord allowances, we would expect capital
expenditures to be in the range of $5&nbsp;million to $6&nbsp;million.


<P align="left" style="font-size: 10pt">I&#146;ll now turn it back over to Robert.


<P align="left" style="font-size: 10pt">Robert Alderson  &#151; Kirkland&#146;s, Inc. &#151; President and CEO


<P align="left" style="font-size: 10pt">Thanks, Mike. We&#146;re very pleased to begin 2009 with strong first quarter financial results,
delivering our fifth straight quarter of positive comparable store sales in our first profitable
first quarter since 2004.


<P align="left" style="font-size: 10pt">The convergence of strong sales and gross margin, expense control and significantly lowered
occupancy costs is a winning combination. Inventory levels remain on plan, and inventories both
current and very clean, as we continue into the second quarter, contributing to our expectation
that favorable gross margin trends will continue.


<P align="left" style="font-size: 10pt">Again, in 2009, margin gain represents one of our best opportunities to improve profitability. As
Mike noted, after several months of rapidly rising transportation costs in 2008, product
transportation costs have declined &#091;in boosting&#093; gross profit margin.


<P align="left" style="font-size: 10pt">We have contractually locked in a portion of our inbound container costs through May&nbsp;2010, but do
expect inbound bunker fuel and outbound diesel fuel costs to trend upward by midyear and beyond, if
oil prices, in fact, move higher in accordance with consensus opinion and recent trends.


<P align="left" style="font-size: 10pt">We are experiencing slight but noticeable at-source product price declines, which have helped our
margin results thus far in 2009. Downward pressure on prices could be reasonably expected for the
year, should the worldwide economic downturn continue to dampen product demand and generate excess
manufacturing capacity.


<P align="left" style="font-size: 10pt">We were pleased that our stores also experienced slightly positive traffic trends during the first
quarter, with stronger improvement evidenced in April. Month-to-month trends within the quarter are
less transparent due to the Easter calendar shift.


<P align="left" style="font-size: 10pt">Traffic was a concern entering the quarter, given continued and apparently long-term problems in
the economy. Despite some very recent national survey evidence of improved consumer confidence, in
our opinion, the customer remains a bit cautious, as survey responses have yet to translate into
widespread actual traffic and sales gains.


<P align="left" style="font-size: 10pt">In our stores, in the first quarter, traffic was up 1% for the quarter, together with a 700 basis
point gain in an average dollar transaction, which we found encouraging and evidence that the
customer continues to shop and respond favorably to value and fresh product offerings. We continue
to address the customer traffic opportunity with regular and planned value-driven merchandise
promotions for which we&#146;ve specially purchased product.


<P align="left" style="font-size: 10pt">Outside the stores, we continue to regularly communicate with customers by email and credit card
communications. During the second quarter, we will communicate with a larger and, hopefully,
new-to-Kirkland&#146;s customer group through enhanced Web communication. Also, the first stage of our
return to e-commerce is on track to begin and would allow customers to reserve merchandise online
for in-store pickup.


<P align="left" style="font-size: 10pt">Our now four-year-old real estate plan to systematically convert our mall store base to off-mall
strip centers continues on pace and is &#091;possibly&#093; affecting profitability, as we replace the
successful mall stores with much more profitable off-mall locations. We continue to realize lower
occupancy costs on remaining mall stores by renewing certain leases at lower rents.


<P align="left" style="font-size: 10pt">As previously stated, we will open 15 to 20 new stores this year, while closing 35 to 40. At this
point, we expect to open 25 to 30 stores in 2010, and project 25 or fewer closings. Our ability to
achieve net new store growth in 2010 and beyond is limited only by our caution in this economic
environment and by the number of great opportunities presented.


<P align="left" style="font-size: 10pt">Building new stores remains a relatively low net cash outlay due to strong landlord contributions.
We continue to close unproductive stores as opportunities arise, in accordance with that long-term
plan. These store closings require no cash outlay and are key to planned lease expirations and not
as a result of the prevailing economic conditions.


<P align="left" style="font-size: 10pt">The vast majority of our planned closings will be accomplished by midyear 2010. Between now and
then and beyond, Kirkland&#146;s will carefully evaluate continuance, allow short-term renewals in mall
stores, and begin to renegotiate many of its early strip center deals coming to lease term, in
order to adjust rents in line with current market conditions.


<P align="left" style="font-size: 10pt">We&#146;re able to be very selective in picking store locations, and we intend to press the opportunity
to lock in historically low occupancy costs on as many leases as possible for the long-term. New
store openings for 2009 are going extremely well and performing substantially above plan. Given the
early results, we&#146;re very optimistic about the potential for this class.


<P align="left" style="font-size: 10pt">While new center development has slowed due to credit market problems and numerous, if not most,
retailers slowing new store growth, we&#146;re finding outstanding lease opportunities in both new and
existing centers. We don&#146;t expect a significant amount of new center development to be available
for us for two to three years and possibly beyond, if the commercial mortgage sector encounters
trouble with new loans or loan renewals due to much stricter loan underwriting standards, as has
been recently and widely speculated in the wake of bank solvency problems.


<P align="left" style="font-size: 10pt">We are well aware of the opportunity to gain market share in this period. Even with our experience
of several quarters of positive comparable sales coinciding with several high-profile chain store
closures in the sector, it&#146;s still somewhat difficult to assess true market share gains. A number
of store closings widely predicted for the sector has not occurred, or is occurring much more
slowly than anticipated.


<P align="left" style="font-size: 10pt">Further, a regressing economy has clearly affected customer traffic and spending inclinations.
We&#146;re grateful for the positive comparable store gains and continue to believe that, as a
recognized and very experienced value operator, we&#146;re very well-positioned with the consumer.


<P align="left" style="font-size: 10pt">To take advantage of the situation, we are &#091;and soon&#093; we&#146;ll be reaching out in more ways than
brick-and-mortar store expansion to aggressively add customers and boost the top line. Since we
don&#146;t have special vision as to timing of economic recovery, we can only act with appropriate
caution and stay on plan with new store openings, while continuing to focus on merchandise
productivity and low-risk, low-cost marketing initiatives that deliver a strong return on
investment.


<P align="left" style="font-size: 10pt">We have suggested in such times the best way to evaluate Kirkland&#146;s as an investment is by gaining
some profitability and the strength of our balance sheet, which represents our mindset as managers
and our goals for increasing shareholder value. Should economic conditions improve more rapidly
than we believe likely, we will be well-positioned as to availability of capital and market
opportunity to accelerate new growth appropriately.


<P align="left" style="font-size: 10pt">As to our progress so far in the second quarter, while it&#146;s early, we&#146;re very pleased to report we
had a very strong beginning on Mother&#146;s Day week. That week is the largest planned sales week of
the first three quarters of the year, and we did very well in the sales and margin lines. The gift
component of the merchandise mix was very well-received, as were the numerous special merchandise
opportunities we offer to drive traffic.


<P align="left" style="font-size: 10pt">We delivered a strong earnings gain in Q1 versus last year, and we expect earnings to improve in
the second quarter versus second quarter 2008, but not at the same level, due to tougher
comparisons, as our performance reversal in 2008 began to accelerate in the second quarter of last
year.


<P align="left" style="font-size: 10pt">2008 was all about riding the ship. 2009 is about keeping it on course and making it go faster and
further. So far, so good, and we look forward to seeing you in our stores.


<P align="left" style="font-size: 10pt">Operator, Mike and I are prepared to take questions.


<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS"> </FONT>QUESTION AND ANSWER


<P align="left" style="font-size: 10pt">Operator


<P align="left" style="font-size: 10pt">(Operator Instructions). Chris Rapalje, SunTrust Robinson Humphrey.


<P align="left" style="font-size: 10pt">Chris Rapalje  &#151; SunTrust Robinson Humphrey &#151; Analyst


<P align="left" style="font-size: 10pt">I had a question on the gross margin. Mike, I think you said that you expected the freight
factor to continue to be a positive, but not to the same extent going forward. And I just wanted to
confirm that. And then also just understand what was unusual about the first quarter or higher than
what you expect going forward?


<P align="left" style="font-size: 10pt">Mike Madden  &#151; Kirkland&#146;s, Inc. &#151; SVP and CFO


<P align="left" style="font-size: 10pt">Well, I think that what we said on the freight is, in the near-term, that does appear to still
be positive for us. I think what you&#146;ve got to watch out for on the freight is fuel costs and in
the latter half of the year, and the impact that will have on the inbound as well as the outbound.
So it&#146;s fuel is the main factor there that we think might drive those costs up in the back half.


<P align="left" style="font-size: 10pt">Chris Rapalje  &#151; SunTrust Robinson Humphrey &#151; Analyst


<P align="left" style="font-size: 10pt">So, have you seen any real change in the behavior about how aggressive they&#146;re trying to fill
these tankers? Or is that still pretty much where you saw it for first quarter?


<P align="left" style="font-size: 10pt">Mike Madden  &#151; Kirkland&#146;s, Inc. &#151; SVP and CFO


<P align="left" style="font-size: 10pt">It&#146;s still going down. We&#146;ve got a price decrease last week. And it&#146;s been fairly steady for
the whole first quarter and year-to-date, but I don&#146;t think we expect that trend to continue
indefinitely.


<P align="left" style="font-size: 10pt">As we said, the guys that run those steamships are trying to maintain market share, and so they&#146;ve
been very aggressive and we&#146;ve been very happy to take advantage of it. How far down it can go or
how long it will go, I think just depends on, as we said, what happens with the economy and fuel
prices.


<P align="left" style="font-size: 10pt">The economy&#146;s not been getting much better, but fuel &#151; oil&#146;s been up $20 a barrel in recent weeks.
So, it&#146;s a little difficult to tell about it, but I think what we said is pretty much how we feel
about it.


<P align="left" style="font-size: 10pt">Chris Rapalje  &#151; SunTrust Robinson Humphrey &#151; Analyst


<P align="left" style="font-size: 10pt">Okay. And with some of the consolidation that&#146;s been going on, have you seen any opportunistic
buys in the space? Or do you expect for that to be a factor going forward?


<P align="left" style="font-size: 10pt">Robert Alderson  &#151; Kirkland&#146;s, Inc. &#151; President and CEO


<P align="left" style="font-size: 10pt">I think in terms of &#151; are you asking about merchandise?


<P align="left" style="font-size: 10pt">Chris Rapalje  &#151; SunTrust Robinson Humphrey &#151; Analyst


<P align="left" style="font-size: 10pt">Yes. So, you know, we, in particular, thought that perhaps that with the linens liquidation,
you may have seen some merchandise come available.


<P align="left" style="font-size: 10pt">Robert Alderson  &#151; Kirkland&#146;s, Inc. &#151; President and CEO


<P align="left" style="font-size: 10pt">You know, we&#146;ve seen some opportunity buys, but really the linens thing has sort of worked its
way through as Bombay &#151; both of those are sort of a year ago. And right now, I think the
opportunity for us is not so much about opportunity buys, but continuing to stay new and fresh, and
as far in front of the marketplace as we can on things that we believe customers will like to have
in their home.


<P align="left" style="font-size: 10pt">We&#146;re continuing to work on adjusting our merchandise mix to the appropriate level between home
decor and gift and impulse. So we still have some opportunity there, but &#151; and we&#146;ll take
advantage of opportunity buys, should they become available. But we haven&#146;t seen a lot of that.


<P align="left" style="font-size: 10pt">Chris Rapalje  &#151; SunTrust Robinson Humphrey &#151; Analyst


<P align="left" style="font-size: 10pt">Okay. And then, finally, with regard to holiday, I guess where are you with your purchasing
for that period? And if you have any thoughts about &#151; that you&#146;d like to share about where you
expect your focus to be with the offering.


<P align="left" style="font-size: 10pt">Robert Alderson  &#151; Kirkland&#146;s, Inc. &#151; President and CEO


<P align="left" style="font-size: 10pt">We will probably buy that merchandise piece down some for 2009 as it relates to the seasonal
decorating side, but we expect those dollars to be translated into more giftable items.


<P align="left" style="font-size: 10pt">So, we&#146;re expecting to have a holiday season; it was an unusual one in 2008, because it came very
late, and the sales were quite explosive as you got within the last seven to eight days before
Christmas. And they were very strong after Christmas for about three weeks.


<P align="left" style="font-size: 10pt">So, very likely we&#146;ll have somewhat of the same sort of season, as customers are going to be
looking for lower prices and bargains, and we&#146;ll try to be appropriately prepared for that, with
well-priced merchandise. And the shift will be as I said.


<P align="left" style="font-size: 10pt">Chris Rapalje  &#151; SunTrust Robinson Humphrey &#151; Analyst


<P align="left" style="font-size: 10pt">Well, good luck. Thanks very much.


<P align="left" style="font-size: 10pt">Operator


<P align="left" style="font-size: 10pt">(Operator Instructions). Brad Leonard, BML Capital Management.


<P align="left" style="font-size: 10pt">Brad Leonard  &#151; BML Capital Management, LLC &#151; Analyst


<P align="left" style="font-size: 10pt">First off, great quarter. And Robert, also, I thought you did a nice job with your letter in
the annual report. (multiple speakers) And just &#151; the only thing I had &#151; I think you covered
pretty much everything in your prepared remarks &#151; can you run by me the opening and closings for
2010 and your thoughts on that, I guess?


<P align="left" style="font-size: 10pt">Robert Alderson  &#151; Kirkland&#146;s, Inc. &#151; President and CEO


<P align="left" style="font-size: 10pt">Yes, I think we will &#151; we&#146;ll open more stores in 2010, and I think probably the most
significant thing about that is, is that I would guess that that&#146;s going to be a very good class.
The preliminary work on 2010 has yielded what we believe are some very good deals and they continue
to be in the core markets.


<P align="left" style="font-size: 10pt">And I think we&#146;ll be &#151; we hope to be slightly in a net growth situation. We said 25 to 30 new
store openings, and we project at this moment about 25 closings. Obviously, the closing part
probably is going to move around a bit more than the opening part.


<P align="left" style="font-size: 10pt">Brad Leonard  &#151; BML Capital Management, LLC &#151; Analyst


<P align="left" style="font-size: 10pt">Okay. And on the closing, are those mostly &#151; I mean, are these just moving from mall to
off-mall? Or are these kind of an expansion in the existing markets, or a mix of both, I guess?


<P align="left" style="font-size: 10pt">Mike Madden  &#151; Kirkland&#146;s, Inc. &#151; SVP and CFO


<P align="left" style="font-size: 10pt">I think for the most part, it&#146;s the move from mall to off-mall. In terms of 2010, I think
we&#146;re starting to get toward the end of that several years of mall lease expiration that we&#146;re
working through.


<P align="left" style="font-size: 10pt">Brad Leonard  &#151; BML Capital Management, LLC &#151; Analyst


<P align="left" style="font-size: 10pt">You&#146;re not going to have many, and so I&#146;m just kind of looking here &#151; we&#146;re going to be down
to maybe 25, 30 by the end of 2010, in mall stores or something like that?


<P align="left" style="font-size: 10pt">Robert Alderson  &#151; Kirkland&#146;s, Inc. &#151; President and CEO


<P align="left" style="font-size: 10pt">It could be. I think we&#146;re going to &#151; as I said, I think we&#146;re going to continue to evaluate
every deal, to see if we can generate with a renewal of some kind. Unless we have an opportunity to
replace that store, we&#146;ll continue to keep it alive if we can generate a strong four-wall
contribution from it.


<P align="left" style="font-size: 10pt">So we&#146;re going to evaluate them one by one. I think it&#146;s the way we&#146;ve been doing it. And we
started doing this five years ago, preparing to be where we are today. And we&#146;re happy to have the
opportunity to make the decisions on a case-by-case basis, as opposed to having to think about
wholesale closings, like some are having to do.


<P align="left" style="font-size: 10pt">Brad Leonard  &#151; BML Capital Management, LLC &#151; Analyst


<P align="left" style="font-size: 10pt">Sure. And then lastly, on the conversion, you say that was slightly down?


<P align="left" style="font-size: 10pt">Mike Madden  &#151; Kirkland&#146;s, Inc. &#151; SVP and CFO


<P align="left" style="font-size: 10pt">Yes. I would say that much of that is a comparison to a quarter that was much more promotional
last year. We had more clearance activity going on in that quarter, as we were working our way
through some of the merchandise that came over from 2007.


<P align="left" style="font-size: 10pt">Brad Leonard  &#151; BML Capital Management, LLC &#151; Analyst


<P align="left" style="font-size: 10pt">Sure. So most of the comp was &#151; it was average ticket, you said?


<P align="left" style="font-size: 10pt">Mike Madden  &#151; Kirkland&#146;s, Inc. &#151; SVP and CFO


<P align="left" style="font-size: 10pt">Yes.


<P align="left" style="font-size: 10pt">Brad Leonard  &#151; BML Capital Management, LLC &#151; Analyst


<P align="left" style="font-size: 10pt">Okay. That&#146;s all I have. Very good. Nice job.


<P align="left" style="font-size: 10pt">Mike Madden  &#151; Kirkland&#146;s, Inc. &#151; SVP and CFO


<P align="left" style="font-size: 10pt">Thanks, Brad.


<P align="left" style="font-size: 10pt">Robert Alderson  &#151; Kirkland&#146;s, Inc. &#151; President and CEO


<P align="left" style="font-size: 10pt">Thank you, Brad. We appreciate it.


<P align="left" style="font-size: 10pt">Operator


<P align="left" style="font-size: 10pt">Neely Tamminga, Piper Jaffray.


<P align="left" style="font-size: 10pt">Maria Vizuete  &#151; Piper Jaffray & Co. &#151; Analyst


<P align="left" style="font-size: 10pt">Good morning, gentlemen. This is actually Maria for Neely. Congratulations on a phenomenal
quarter.


<P align="left" style="font-size: 10pt">Robert Alderson  &#151; Kirkland&#146;s, Inc. &#151; President and CEO


<P align="left" style="font-size: 10pt">Thank you.


<P align="left" style="font-size: 10pt">Maria Vizuete  &#151; Piper Jaffray & Co. &#151; Analyst


<P align="left" style="font-size: 10pt">I just &#151; yes, you&#146;re welcome. I just have a couple of questions. If you can talk a little bit
about what you guys did in the first quarter, to drive traffic, and what your plans are for the
next couple quarters to continue that &#151; to keep that traffic positive.


<P align="left" style="font-size: 10pt">Robert Alderson  &#151; Kirkland&#146;s, Inc. &#151; President and CEO


<P align="left" style="font-size: 10pt">Well, we continue to communicate strongly with our customers through email and let them know
about opportunities that are available in the store, whether its a sale event or something else
that we think is &#151; would be interesting to them. We are very value-driven and they understand
that, but we&#146;re also very &#151; we&#146;re delivering great style, so I think the combination of price and
style, when we communicate that, does very well with customers.


<P align="left" style="font-size: 10pt">We&#146;re also communicating in-store with signage about what&#146;s special and what&#146;s going on, and we
have merchandise to back that up. We&#146;ve bought for weekend events, and we&#146;ve run a couple of
special events this year on Fridays that we haven&#146;t done before. We do weekend sales. The one-day
sales have been something that&#146;s new to the first half of this year.


<P align="left" style="font-size: 10pt">So we&#146;ll continue to try to be aware that we have a customer that&#146;s challenged right now, and to
deliver them merchandise that&#146;s attractive to them, both in price and quality and style; but also
deliver it at a price that makes it profitable for Kirkland&#146;s to sell it to them.


<P align="left" style="font-size: 10pt">So, that&#146;s our focus. And so far, that&#146;s been a combination that&#146;s brought people to the store. We
also have a very loyal customer base, and we&#146;re very thankful for that.


<P align="left" style="font-size: 10pt">Maria Vizuete  &#151; Piper Jaffray & Co. &#151; Analyst


<P align="left" style="font-size: 10pt">That&#146;s great, thank you. Can you also talk a little bit about that customer base? Are you guys
&#151; do you guys think that you&#146;re attracting a new customer? Or do you just think this is the loyal
shopper that you&#146;ve (technical difficulty)?


<P align="left" style="font-size: 10pt">Robert Alderson  &#151; Kirkland&#146;s, Inc. &#151; President and CEO


<P align="left" style="font-size: 10pt">We are obviously attracting our loyal customer, and the effort that we&#146;re making, and we
alluded to, is to be much more aware of developing new customers.


<P align="left" style="font-size: 10pt">We&#146;re going to try to reach out to them, beginning this quarter, to add to our email base. We know
that when we send an effective email communication, our customer responds. So it would make sense
to expand that base.


<P align="left" style="font-size: 10pt">We&#146;ll do some &#151; we&#146;ll make use of some of the social networking sites on a limited basis beginning
this quarter, but continue to expand that, to try to get customers to help us add customers. And we
will also, I think, reach more customers, many of whom we hope are new, not only as ones that, as
we begin to serve their market again by adding a store, but customers that will possibly respond to
our new e-commerce initiative.


<P align="left" style="font-size: 10pt">That&#146;s going to start very slowly in this quarter, and then, hopefully, accelerate over the next 12
to 18&nbsp;months.


<P align="left" style="font-size: 10pt">Maria Vizuete  &#151; Piper Jaffray & Co. &#151; Analyst


<P align="left" style="font-size: 10pt">Great. Thank you so much, and good luck.


<P align="left" style="font-size: 10pt">Operator


<P align="left" style="font-size: 10pt">(Operator Instructions). Keith Curtis, Brant Point Capital.


<P align="left" style="font-size: 10pt">Keith Curtis  &#151; Brant Point Capital Management &#151; Analyst


<P align="left" style="font-size: 10pt">For someone that&#146;s new to the story, I guess the answer to the prior question helped a little
bit, but how would you explain such positive &#151; you guys are really outperforming in this
environment &#151; how do you take a step back and just kind of &#151; how do you explain the strength in
the comps over the last year?


<P align="left" style="font-size: 10pt">Robert Alderson  &#151; Kirkland&#146;s, Inc. &#151; President and CEO


<P align="left" style="font-size: 10pt">I think we have better merchandise in the store. And it&#146;s much better priced in relation to
the value of that merchandise. And so I think that&#146;s attractive to customers, and especially in a
time of economic challenge. But that&#146;s &#151; Kirkland&#146;s has been successful &#151; we&#146;ve been around for
46&nbsp;years or so, and the times of deep economic challenge have been a very small portion of that. So
we have some experience as a value operator that I think is very valuable to us right now.


<P align="left" style="font-size: 10pt">I think the other part of that is that we have been much better about communicating with the
customers and inviting them into the store. I think our ability to reach out to them has improved
dramatically over what we did a few years ago, and that&#146;s been helpful. But most of all, it&#146;s been
about merchandise improvement.


<P align="left" style="font-size: 10pt">Keith Curtis  &#151; Brant Point Capital Management &#151; Analyst


<P align="left" style="font-size: 10pt">And your traffic is positive?


<P align="left" style="font-size: 10pt">Robert Alderson  &#151; Kirkland&#146;s, Inc. &#151; President and CEO


<P align="left" style="font-size: 10pt">It&#146;s been positive this year, yes.


<P align="left" style="font-size: 10pt">Keith Curtis  &#151; Brant Point Capital Management &#151; Analyst


<P align="left" style="font-size: 10pt">Okay. And your comments earlier on the gross margins, I think you said second quarter was a
less profitable quarter because of promotions. But in terms of the year-over-year delta, how would
you guide us in terms of having looked at that versus what you just did in Q1, where you had about
a 600 basis point improvement? Could we still look for some year-over-year improvement or &#151;?


<P align="left" style="font-size: 10pt">Mike Madden  &#151; Kirkland&#146;s, Inc. &#151; SVP and CFO


<P align="left" style="font-size: 10pt">Yes. It&#146;s Mike. I think what we said in our comments that while we didn&#146;t expect the margins
to be at the level of Q1, we still expected to outperform the prior year&#146;s second quarter. It is
more promotional because you have some clearance events, you&#146;ve got some holidays, but we still
expect margins to improve.


<P align="left" style="font-size: 10pt">Keith Curtis  &#151; Brant Point Capital Management &#151; Analyst


<P align="left" style="font-size: 10pt">Bit in terms of the level of year-over-year improvement, I mean, you had such a big (multiple
speakers) &#151;


<P align="left" style="font-size: 10pt">Mike Madden  &#151; Kirkland&#146;s, Inc. &#151; SVP and CFO


<P align="left" style="font-size: 10pt">Well, the level of year-over-year improvement in the first quarter was increased a bit because
we were up against a quarter that, as I said earlier, had more clearance activity, because as we
came out of 2007, we still had some pockets of merchandise that we had to work through in the early
part of first quarter 2008.


<P align="left" style="font-size: 10pt">So the margin comparison in the first quarter was a little bit easier. As you work your way through
the year, however, that&#146;s going to be a little bit more difficult because we started to gain some
traction in merchandising as the year went on and the margins improved.


<P align="left" style="font-size: 10pt">Keith Curtis  &#151; Brant Point Capital Management &#151; Analyst


<P align="left" style="font-size: 10pt">Okay, I see. And just lastly on your cash flow, it looked like your cash from operations was
negative this quarter. Just &#151; I&#146;m not sure if you commented on that in your prepared remarks. I&#146;m
just curious what the color is there.


<P align="left" style="font-size: 10pt">Mike Madden  &#151; Kirkland&#146;s, Inc. &#151; SVP and CFO


<P align="left" style="font-size: 10pt">The main reason for that is a tax payment that was made in April. We paid about $5.6&nbsp;million
in income taxes out in April of this year.


<P align="left" style="font-size: 10pt">Keith Curtis  &#151; Brant Point Capital Management &#151; Analyst


<P align="left" style="font-size: 10pt">Got it. Great, thanks a lot.


<P align="left" style="font-size: 10pt">Mike Madden  &#151; Kirkland&#146;s, Inc. &#151; SVP and CFO


<P align="left" style="font-size: 10pt">All right, thank you.


<P align="left" style="font-size: 10pt">Robert Alderson  &#151; Kirkland&#146;s, Inc. &#151; President and CEO


<P align="left" style="font-size: 10pt">Thank you.


<P align="left" style="font-size: 10pt">Operator


<P align="left" style="font-size: 10pt">And Mr.&nbsp;Alderson, there are no further questions at this time. I will now turn the call back
to you.


<P align="left" style="font-size: 10pt">Robert Alderson  &#151; Kirkland&#146;s, Inc. &#151; President and CEO


<P align="left" style="font-size: 10pt">Thanks very much, everyone. We appreciate you joining us today and we look forward to talking
with you again soon.


<P align="left" style="font-size: 10pt">Operator


<P align="left" style="font-size: 10pt">Ladies and gentlemen, that does conclude the conference call for today. We thank you for your
participation and ask that you please disconnect your line.



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