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<SEC-DOCUMENT>0001299933-10-001100.txt : 20100317
<SEC-HEADER>0001299933-10-001100.hdr.sgml : 20100317
<ACCEPTANCE-DATETIME>20100316183119
ACCESSION NUMBER:		0001299933-10-001100
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20100312
ITEM INFORMATION:		Results of Operations and Financial Condition
ITEM INFORMATION:		Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers: Compensatory Arrangements of Certain Officers
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20100317
DATE AS OF CHANGE:		20100316

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:		10686941

	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_36767.htm
<DESCRIPTION>LIVE FILING
<TEXT>
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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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<P ALIGN="CENTER">
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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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	&nbsp;
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	Date of Report (Date of Earliest Event Reported):
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	&nbsp;
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	March 12, 2010
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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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<P ALIGN="CENTER">
<FONT SIZE="2">
	Not Applicable
<BR>______________________________________________<BR>
	Former name or former address, if changed since last report
</FONT>
<P ALIGN="CENTER">
<FONT SIZE="2">
	&nbsp;
</FONT>
<!-- 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>
<FONT SIZE="2">Top of the Form</FONT>
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<B>
	Item 2.02 Results of Operations and Financial Condition.
</B>
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<FONT SIZE="2">
On March 12, 2010, Kirkland's, Inc. (the "Company") issued a press release and conducted a conference call regarding its sales and earnings release results for its fourth fiscal quarter and year-to-date period ended January 30, 2010 (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. <br>
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<B>
	Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
</B>
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<P ALIGN="LEFT">
<FONT SIZE="2">
(e) On March 12, 2010 the Compensation Committee of our Board of Directors approved, effective as of March 28, 2010, the fiscal 2010 salary for our executive officers, and the following table sets forth the fiscal 2010 base salaries for our Named Executive Officers:<br><br>Named Executive Officer - Base Salary<br>Robert E. Alderson - $500,000<br>W. Michael Madden - $325,000<br><br>Also on March 12, 2010, the Compensation Committee of our Board of Directors reviewed the achievement of Company performance goals and individual performance goals for fiscal 2009 with respect to our executive officers. Based on the Committee's review, the Compensation Committee approved the following bonuses for fiscal 2009 for the executive officers named below:<br><br>Named Executive Officer - Fiscal 2009 Bonus<br>Robert E. Alderson - $600,000<br>W. Michael Madden - $292,500 <br><br> <br><br>
</FONT>
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<B>
	Item 9.01 Financial Statements and Exhibits.
</B>
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<P ALIGN="LEFT">
<FONT SIZE="2">
(d) Exhibits<br><br>99.1 Press Release dated March 12, 2010 announcing the Company's fourth quarter and annual financial results.<br><br>99.2 Transcript of the March 12, 2010 conference call conducted by the Company. <br>
</FONT>
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<B>
	SIGNATURES
</B>
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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.
</FONT>
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<FONT SIZE="2">
	Kirkland's, Inc.
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	&nbsp;&nbsp;
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	&nbsp;
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	&nbsp;
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<I>
	March 16, 2010
</I>
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</TD>
<TD>
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	&nbsp;
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<I>
	By:
</I>
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</TD>
<TD>
<FONT SIZE="2">
	&nbsp;
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<I>
	/s/ Robert E. Alderson
</I>
<BR>
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	&nbsp;
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<I>
	Name: Robert E. Alderson
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<I>
	Title: President and Chief Executive Officer
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	Exhibit&nbsp;Index
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	Exhibit No.
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	&nbsp;
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	Description
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	99.1
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	&nbsp;
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<TD ALIGN="LEFT" VALIGN="TOP" WIDTH="77%">
<FONT SIZE="2">
Press Release dated March 12, 2010 announcing the Company's fourth quarter and annual financial results
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	99.2
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	&nbsp;
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Transcript of the March 12, 2010 conference call conducted by the Company
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<TYPE>EX-99.1
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<FILENAME>exhibit1.htm
<DESCRIPTION>EX-99.1
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<TITLE> EX-99.1 </TITLE>
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<BODY style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt"><FONT style="font-size: 12pt"><img src="e29408-1075122727826ec65c_1.jpg">
</FONT>

<P align="right" style="font-size: 12pt"><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="center" style="font-size: 11.5pt"><FONT style="font-size: 12.5pt"><B>KIRKLAND&#146;S REPORTS FOURTH QUARTER AND ANNUAL RESULTS</B></FONT>



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

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

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    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Comparable store sales increase 10.2%</I></TD>
</TR>

</TABLE>


<P>
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    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Reports EPS of $1.08 versus $0.76 a year ago</I></TD>
</TR>

</TABLE>


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

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    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Adjusted EPS increases to $0.92 versus $0.59 a year ago</I></TD>
</TR>

</TABLE>


<P>
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    <TD width="1%">&nbsp;</TD>
    <TD><I>Total sales increased 6.9% despite 20 fewer stores from a year ago</I></TD>
</TR>

</TABLE>


<P>
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    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Cash balance improves to $76.4&nbsp;million versus $36.4&nbsp;million a year ago</I></TD>
</TR>

</TABLE>


<P align="left" style="font-size: 12pt"><B>Fiscal 2009 Highlights:</B>


<P>
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    <TD width="1%">&nbsp;</TD>
    <TD><I>Comparable store sales increase 8.4%</I></TD>
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</TABLE>


<P>
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    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Reports EPS of $1.71 versus $0.47 a year ago</I></TD>
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</TABLE>


<P>
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    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Adjusted EPS increases to $1.42 versus $0.30 a year ago</I></TD>
</TR>

</TABLE>


<P>
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    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Ends the year with no debt</I></TD>
</TR>

</TABLE>


<P>
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    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Issues performance goals for fiscal 2010</I></TD>
</TR>

</TABLE>


<P align="left" style="font-size: 12pt"><FONT style="font-size: 11pt">NASHVILLE, Tenn. (March&nbsp;12, 2010) &#151; Kirkland&#146;s, Inc. (NASDAQ: KIRK) today reported financial
results for the 13-week and 52-week periods ended January&nbsp;30, 2010.
</FONT>

<P align="left" style="font-size: 11pt">Net sales for the 13-week period ended January&nbsp;30, 2010, increased 6.9% to $142.8&nbsp;million compared
with $133.6&nbsp;million for the 13-week period ended January&nbsp;31, 2009. Comparable store sales for the
fourth quarter of fiscal 2009 increased 10.2% compared with an increase of 5.3% in the prior-year
period. The Company opened 3 stores and closed 20 stores during the quarter to end the period with
279 stores.


<P align="left" style="font-size: 11pt">Net sales for the 52-week period ended January&nbsp;30, 2010, increased 3.8% to $406.2&nbsp;million compared
with $391.3&nbsp;million for the 52-week period ended January&nbsp;31, 2009. Comparable store sales for the
52- week period ended January&nbsp;30, 2010, increased 8.4% compared with an increase of 3.6% in the
prior-year period. The Company opened 18 stores and closed 38 stores during the 52-week period.


<P align="left" style="font-size: 11pt">The Company reported net income of $22.1&nbsp;million, or $1.08 per diluted share, for the 13-week
period ended January&nbsp;30, 2010, compared with net income of $15.0&nbsp;million, or $0.76 per diluted
share, for the 13-week period ended January&nbsp;31, 2009. For the 52-week period, the Company reported
net income of $34.6&nbsp;million, or $1.71 per diluted share, compared with net income of $9.3&nbsp;million,
or $0.47 per diluted share in the prior-year period.


<P align="center" style="font-size: 11pt"><FONT style="font-size: 11.5pt">-MORE-</FONT>



<P align="center" style="font-size: 11.5pt"><FONT style="font-size: 10pt">2501 McGavock Pike, Suite&nbsp;1000 &#166; Nashville, Tennessee 37214 &#166; (615)&nbsp;872-4800</FONT>



<P align="left" style="font-size: 10pt"><FONT style="font-size: 11.5pt">KIRK Reports Fourth Quarter and Annual Results
<BR>
Page 2
<BR>
March&nbsp;12, 2010
</FONT>

<P align="left" style="font-size: 11.5pt"><FONT style="font-size: 11pt">Income tax expense for the 13-week periods ended January&nbsp;30, 2010 and January&nbsp;31, 2009 include
a benefit of approximately $3.3&nbsp;million and $3.4&nbsp;million, respectively, related to the reversal of
a portion of the valuation allowance on the Company&#146;s deferred tax assets established in fiscal
2007. Income tax expense for the 52-week periods ended January&nbsp;30, 2010 and January&nbsp;31, 2009
included a benefit of approximately $5.4&nbsp;million and $3.4&nbsp;million, respectively, related to the
reversal of a portion of the valuation allowance. At January&nbsp;30, 2010, there is no remaining
valuation allowance against the Company&#146;s deferred tax assets.
</FONT>

<P align="left" style="font-size: 11pt">As discussed in previous quarters, the Company believes that presenting adjusted net income and
earnings per share for its 2009 periods to reflect more normalized tax rates is instrumental in
judging the Company&#146;s performance for future periods when the Company is expected to incur a higher
effective tax rate. See &#147;Reconciliation of Non-GAAP Financial Information&#148; below.


<P align="left" style="font-size: 11pt">Robert Alderson, Kirkland&#146;s President and Chief Executive Officer, said, &#147;We reached historic
levels of quarterly operating and financial performance throughout fiscal 2009. The fourth quarter
was no exception with continued growth in sales, margin improvement and cash generation on top of a
tough comparison from a year ago. Strong results have continued year-to-date in the first quarter
of fiscal 2010.


<P align="left" style="font-size: 11pt">&#147;We have established significant momentum in the marketplace with merchandise resonating very well
with our customers. Traffic increases were strong in the fourth quarter and have accelerated
year-to-date in 2010. Our goal for 2010 is to take advantage of this momentum and build strongly
on our 2009 success. High levels of unemployment are still a concern, but our store model has
proven to be very resilient and productive during a historically challenging economic period for
retail. We are now poised to begin experiencing the benefits from accelerating the growth in our
store base, adding e-commerce, making investments in information systems to drive productivity and
improving the customer experience in our stores.&#148;


<P align="left" style="font-size: 11pt"><I>Fiscal 2010 Performance Goals</I>


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

<TR valign="top" style="font-size: 11pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Store Growth: </B>At year-end, the Company had 279 stores compared with 299 stores at the beginning of
fiscal 2009 and 335 stores at the beginning of fiscal 2008. For fiscal 2010, the Company
expects to return to net store growth. The Company expects to open 30 to 40 new stores and
close 15 to 20 stores. Store openings will be spread fairly evenly over the year with the
last new store openings occurring in mid-November. Closings should be spread relatively
evenly over the course of the entire year. For 2011, the Company is targeting net store unit
growth of approximately 10% and net square footage growth of approximately 15%.</TD>
</TR>

</TABLE>


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

<TR valign="top" style="font-size: 11pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Net Sales: </B>The Company expects total sales for fiscal 2010 to increase in the range of 5% to
8% compared with fiscal 2009 despite a lower average store count. This level of sales
increase would imply solid comparable store sales growth combined with a sales lift provided
by new stores.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 11pt"><FONT style="font-size: 11.5pt">-MORE-</FONT>



<P align="left" style="font-size: 11.5pt">KIRK Reports Fourth Quarter and Annual Results
<BR>
Page 3
<BR>
March&nbsp;12, 2010

<DIV align="center">
<TABLE style="font-size: 11.5pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="14%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="86%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 11.5pt">
    <TD align="left" valign="top"><FONT style="font-size: 11pt"><B>Margins:</B></FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT style="font-size: 11pt">The Company is targeting incremental operating margin gains<BR>
above fiscal 2009 levels in fiscal 2010. The Company expects to<BR>
drive this operating margin improvement with its still<BR>
improving merchandise assortment, better occupancy cost<BR>
leverage, focus on controlling corporate costs, productivity<BR>
increases from investments in systems and a consistently<BR>
efficient distribution infrastructure. While merchandise<BR>
margins have been strong to start the year, increases in<BR>
overseas freight costs could make merchandise margin<BR>
improvement more difficult as the year progresses. The Company<BR>
expects that it should be able to leverage expenses with<BR>
comparable store sales increases of approximately 3%.</FONT></DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD align="left" valign="top"><FONT style="font-size: 11pt"><B>Earnings:</B></FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT style="font-size: 11pt">Adjusted to eliminate the impact of the difference in effective<BR>
tax rates, the Company would expect to report an increase in<BR>
earnings in fiscal 2010. The Company expects its effective tax<BR>
rate for fiscal 2010 to be in the range of approximately 39% to<BR>
40% compared with 26.4% in fiscal 2009. The Company&#146;s total<BR>
reported net income and EPS will most likely decline in fiscal<BR>
2010 versus fiscal 2009 due to the significant increase in the<BR>
tax rate.</FONT></DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD align="left" valign="top"><FONT style="font-size: 11pt"><B>Cash Flow:</B></FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT style="font-size: 11pt">The Company expects to generate positive cash flow in fiscal<BR>
2010 and fully fund its new store growth and technology<BR>
improvements through cash generated from operations. Capital<BR>
expenditures are estimated to range between $25&nbsp;million and $28<BR>
million in fiscal 2010.</FONT></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 fourth quarter of fiscal 2009. The number to call for the interactive teleconference is
(212)&nbsp;231-2900. A replay of the conference call will be available through Friday, March&nbsp;19, 2010,
by dialing (402)&nbsp;977-9140 and entering the confirmation number, 21457868.


<P align="left" style="font-size: 11pt">A live broadcast of Kirkland&#146;s quarterly conference call will be available online at the Company&#146;s
web site <U>www.kirklands.com</U> under Investor Relations or
<U>http://www.videonewswire.com/event.asp?id=66149</U> on March&nbsp;12,&nbsp;2010, beginning at
11:00&nbsp;a.m.&nbsp;ET. The online replay will follow shortly after the call and continue for one year.


<P align="left" style="font-size: 11pt"><I>Reconciliation of Non-GAAP Information</I>
<BR>
This release includes certain financial information not derived in accordance with generally
accepted accounting principles (&#147;GAAP&#148;). The non-GAAP measures are &#147;adjusted net income&#148; and
&#147;adjusted earnings per share&#148; and are equal to net income, and earnings per share excluding
adjustments to the Company&#146;s valuation allowance for deferred tax assets and certain income tax
credits related to prior periods. Management uses these measures to focus on normalized
operations, and believes that it is useful to investors because it enables them to perform more
meaningful comparisons of past, present and future operating results. The Company believes that
using this information, along with the corresponding GAAP measures, provides for a more complete
analysis of the results of operations by quarter. Net income and earnings per share are the most
directly comparable GAAP measures. Below is a reconciliation of the non-GAAP measures to their
most comparable GAAP measures:


<P align="center" style="font-size: 11pt"><FONT style="font-size: 11.5pt">-MORE-</FONT>



<P align="left" style="font-size: 11.5pt">KIRK Reports Fourth Quarter and Annual Results
<BR>
Page 4
<BR>
March&nbsp;12, 2010


<P align="left" style="font-size: 11.5pt"><FONT style="font-size: 11pt"><U>Reconciliation of Non-GAAP Financial Information</U>
</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="44%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 11pt">
    <TD><FONT style="font-size: 10pt">(dollars in thousands, except per share amounts)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center"><FONT style="font-size: 10pt">13 Weeks Ended</FONT></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center"><FONT style="font-size: 10pt">52 Weeks Ended</FONT></TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left"><FONT style="font-size: 9pt">January 30, 2010<BR></FONT></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left"><FONT style="font-size: 9pt">January 31, 2009<BR></FONT></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left"><FONT style="font-size: 9pt">January 30, 2010<BR></FONT></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left"><FONT style="font-size: 9pt">January  31, 2009<BR></FONT></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>&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>
    <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: 9pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT style="font-size: 10pt"><B>Net income</B></FONT></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>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT style="font-size: 10pt">Net income in accordance with GAAP</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-size: 10pt">$</FONT></TD>
    <TD align="right"><FONT style="font-size: 10pt">22,078</FONT></TD>
    <TD><FONT style="font-size: 10pt"></FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-size: 10pt">$</FONT></TD>
    <TD align="right"><FONT style="font-size: 10pt">15,022</FONT></TD>
    <TD><FONT style="font-size: 10pt"></FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-size: 10pt">$</FONT></TD>
    <TD align="right"><FONT style="font-size: 10pt">34,570</FONT></TD>
    <TD><FONT style="font-size: 10pt"></FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-size: 10pt">$</FONT></TD>
    <TD align="right"><FONT style="font-size: 10pt">9,305</FONT></TD>
    <TD><FONT style="font-size: 10pt"></FONT></TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT style="font-size: 10pt">Adjustments to the valuation allowance for deferred
tax assets and certain income tax credits related to
prior periods</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><FONT style="font-size: 10pt"></FONT></TD>
    <TD align="right"><FONT style="font-size: 10pt">($3,319</FONT></TD>
    <TD nowrap><FONT style="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><FONT style="font-size: 10pt"></FONT></TD>
    <TD align="right"><FONT style="font-size: 10pt">&nbsp;($3,376</FONT></TD>
    <TD nowrap><FONT style="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><FONT style="font-size: 10pt"></FONT></TD>
    <TD align="right"><FONT style="font-size: 10pt">&nbsp;($5,881</FONT></TD>
    <TD nowrap><FONT style="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><FONT style="font-size: 10pt"></FONT></TD>
    <TD align="right"><FONT style="font-size: 10pt">&nbsp;($3,376</FONT></TD>
    <TD nowrap><FONT style="font-size: 10pt">)</FONT></TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT style="font-size: 10pt">Adjusted net income</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-size: 10pt">$</FONT></TD>
    <TD align="right"><FONT style="font-size: 10pt">18,759</FONT></TD>
    <TD><FONT style="font-size: 10pt"></FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-size: 10pt">$</FONT></TD>
    <TD align="right"><FONT style="font-size: 10pt">11,646</FONT></TD>
    <TD><FONT style="font-size: 10pt"></FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-size: 10pt">$</FONT></TD>
    <TD align="right"><FONT style="font-size: 10pt">28,689</FONT></TD>
    <TD><FONT style="font-size: 10pt"></FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-size: 10pt">$</FONT></TD>
    <TD align="right"><FONT style="font-size: 10pt">5,929</FONT></TD>
    <TD><FONT style="font-size: 10pt"></FONT></TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT style="font-size: 10pt"><B>Diluted earnings per share</B></FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT style="font-size: 10pt">Diluted EPS in accordance with GAAP</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-size: 10pt">$</FONT></TD>
    <TD align="right"><FONT style="font-size: 10pt">1.08</FONT></TD>
    <TD><FONT style="font-size: 10pt"></FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-size: 10pt">$</FONT></TD>
    <TD align="right"><FONT style="font-size: 10pt">0.76</FONT></TD>
    <TD><FONT style="font-size: 10pt"></FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-size: 10pt">$</FONT></TD>
    <TD align="right"><FONT style="font-size: 10pt">1.71</FONT></TD>
    <TD><FONT style="font-size: 10pt"></FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-size: 10pt">$</FONT></TD>
    <TD align="right"><FONT style="font-size: 10pt">0.47</FONT></TD>
    <TD><FONT style="font-size: 10pt"></FONT></TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT style="font-size: 10pt">Adjustments to the valuation allowance for deferred
tax assets and certain income tax credits related to
prior periods</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><FONT style="font-size: 10pt"></FONT></TD>
    <TD align="right"><FONT style="font-size: 10pt">&nbsp;($0.16</FONT></TD>
    <TD nowrap><FONT style="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><FONT style="font-size: 10pt"></FONT></TD>
    <TD align="right"><FONT style="font-size: 10pt">&nbsp;($0.17</FONT></TD>
    <TD nowrap><FONT style="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-size: 10pt"></FONT></TD>
    <TD align="right"><FONT style="font-size: 10pt">($0.29)&nbsp;</FONT></TD>
    <TD><FONT style="font-size: 10pt"></FONT></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><FONT style="font-size: 10pt"></FONT></TD>
    <TD align="right"><FONT style="font-size: 10pt">&nbsp;($0.17</FONT></TD>
    <TD nowrap><FONT style="font-size: 10pt">)</FONT></TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT style="font-size: 10pt">Adjusted diluted earnings per share</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-size: 10pt">$</FONT></TD>
    <TD align="right"><FONT style="font-size: 10pt">0.92</FONT></TD>
    <TD><FONT style="font-size: 10pt"></FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-size: 10pt">$</FONT></TD>
    <TD align="right"><FONT style="font-size: 10pt">0.59</FONT></TD>
    <TD><FONT style="font-size: 10pt"></FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-size: 10pt">$</FONT></TD>
    <TD align="right"><FONT style="font-size: 10pt">1.42</FONT></TD>
    <TD><FONT style="font-size: 10pt"></FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-size: 10pt">$</FONT></TD>
    <TD align="right"><FONT style="font-size: 10pt">0.30</FONT></TD>
    <TD><FONT style="font-size: 10pt"></FONT></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>
    <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="left" style="font-size: 10pt"><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 282 stores in 29 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"><FONT style="font-size: 12pt">-MORE-</FONT>



<P align="left" style="font-size: 12pt"><FONT style="font-size: 11.5pt">KIRK Reports Fourth Quarter and Annual Results
<BR>
Page 5
<BR>
March&nbsp;12, 2010
</FONT>

<P align="left" style="font-size: 11.5pt"><FONT style="font-size: 11pt">KIRKLAND&#146;S, INC.
<BR>
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME
<BR>
(in thousands, except per share amounts)
</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="70%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&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="3">13 Weeks Ended</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">13 Weeks Ended</TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">January 30,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">January 31,</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">2010</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2009</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">142,797</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">133,638</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cost of sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,991</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,297</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,647</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Operating expenses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,318</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,995</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,488</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,901</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,491</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,751</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest and other expense (income)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(158</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Income before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,909</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Income tax expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,387</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">887</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:50px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">22,078</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">15,022</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Earnings per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.76</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.76</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Shares used to calculate earnings per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,731</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,649</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,837</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"><FONT style="font-size: 11.5pt">-MORE-</FONT>



<P align="left" style="font-size: 11.5pt">KIRK Reports Fourth Quarter and Annual Results
<BR>
Page 6
<BR>
March&nbsp;12, 2010


<P align="left" style="font-size: 11.5pt"><FONT style="font-size: 11pt">KIRKLAND&#146;S, INC.
<BR>
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME
<BR>
(in thousands, except per share amounts)
</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="70%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&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="3">52 Weeks Ended</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">52 Weeks Ended</TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">January 30,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">January 31,</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">2010</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2009</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">406,194</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">391,277</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cost of sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">237,012</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">256,228</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">169,182</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135,049</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Operating expenses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107,739</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">106,639</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,741</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,669</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest and other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(47</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(419</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Income before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,985</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,088</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Income tax expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,415</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">783</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:50px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">34,570</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,305</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Earnings per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.76</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.47</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.47</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Shares used to calculate earnings per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,628</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,249</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,691</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"><FONT style="font-size: 11.5pt">-MORE-</FONT>



<P align="left" style="font-size: 11.5pt">KIRK Reports Fourth Quarter and Annual Results
<BR>
Page 7
<BR>
March&nbsp;12, 2010


<P align="left" style="font-size: 11.5pt"><FONT style="font-size: 11pt">KIRKLAND&#146;S, INC.
<BR>
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
<BR>
(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="72%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&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">January 30, 2010</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">January 31, 2009</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>
</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>
</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">$</TD>
    <TD align="right">76,412</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">36,445</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">39,355</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,686</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,552</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,831</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,331</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,360</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">123,650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,322</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">36,856</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,826</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Non-current deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,395</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,998</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">640</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">618</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:10px; text-indent:-10px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">165,541</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">126,764</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left: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>
</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">$</TD>
    <TD align="right">15,589</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">13,501</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">7,087</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,349</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,402</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,981</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">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,078</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,831</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">28,978</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,582</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">Total liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,056</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,413</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">88,485</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,351</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:10px; text-indent:-10px">Total liabilities and shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">165,541</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">126,764</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"><FONT style="font-size: 11.5pt">-MORE-</FONT>



<P align="left" style="font-size: 11.5pt">KIRK Reports Fourth Quarter and Annual Results
<BR>
Page 8
<BR>
March&nbsp;12, 2010


<P align="left" style="font-size: 11.5pt"><FONT style="font-size: 11pt">KIRKLAND&#146;S, INC.
<BR>
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<BR>
(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="62%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">52 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">January 30, 2010</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">January 31, 2009</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 align="right">$</TD>
    <TD align="right">49,972</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">29,562</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">(10,246</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">960</TD>
    <TD>&nbsp;</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">241</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103</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 increase</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">39,967</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">30,625</TD>
    <TD>&nbsp;</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">$</TD>
    <TD align="right">76,412</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">36,445</TD>
    <TD>&nbsp;</TD>
</TR>
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<P align="left" style="font-size: 10pt"><FONT style="font-size: 8pt">CORPORATE PARTICIPANTS
</FONT>

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


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


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


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


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


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


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


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


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


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


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


<P align="left" style="font-size: 8pt">Brad Leonard


<P align="left" style="font-size: 8pt">BML Capital Management, LLC &#151; Analyst


<P align="left" style="font-size: 8pt">PRESENTATION


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


<P align="left" style="font-size: 8pt">Ladies and gentlemen, thank you for standing by. Welcome to Kirkland&#146;s Inc. fourth-quarter
2009 earnings call. During the presentation, all participants will be in a listen-only mode. And
afterwards we will conduct a question and answer session. As a reminder this conference is being
recorded Friday, March&nbsp;12, 2010. I would now like to turn the conference over to Mr.&nbsp;Tripp
Sullivan. Please go ahead, Mr.&nbsp;Sullivan.


<P align="left" style="font-size: 8pt">Tripp Sullivan  &#151; Corporate Communications, Inc. &#151; IR


<P align="left" style="font-size: 8pt">Thank you. Good morning, and welcome to this Kirkland&#146;s Inc. conference call to review the
Company&#146;s results for the fourth quarter of fiscal 2009. On the call this morning are Robert
Alderson, President and Chief Executive Officer, and Mike Madden, Senior Vice President and Chief
Financial Officer.


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


<P align="left" style="font-size: 8pt">Forward-looking statements involve known and unknown risks and uncertainties, which may cause
Kirkland&#146;s actual results in future periods to differ materially from forecasted results. Those
risks and uncertainties are more fully described in Kirkland&#146;s filings with the securities and
exchange commission, including the Company&#146;s annual report on Form 10-K filed on April&nbsp;20, 2009.
With that said, I&#146;ll turn the call over to you, Robert.


<P align="left" style="font-size: 8pt">Robert Alderson  &#151; Kirkland&#146;s, Inc. &#151; President and CEO&nbsp;


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


<P align="left" style="font-size: 8pt">We are very pleased to have completed fiscal 2009 with a strong fourth quarter. Our results were
driven by a comp sales gain of 10.2% combined with strong improvements in our merchandise and
operating margins versus the prior year. Our financial position has improved over the year, ending
the year with a cash balance of $76.4&nbsp;million and no debt. Mike Madden, our CFO, will now walk you
through the fourth-quarter results and our financial position. Mike?


<P align="left" style="font-size: 8pt">Mike Madden  &#151; Kirkland&#146;s, Inc. &#151; SVP and CFO&nbsp;


<P align="left" style="font-size: 8pt">Thanks, Robert, and good morning, everyone. I will begin with a review of the fourth-quarter
financial statements and then finish with some guidance for fiscal 2010 and beyond.


<P align="left" style="font-size: 8pt">For the fourth quarter, net sales were $142.8&nbsp;million, a 6.9% increase over the prior-year quarter,
despite operating 20 fewer stores. Comparable store sales increased 10.2%. Average sales per store
were up 15%.


<P align="left" style="font-size: 8pt">The comp sales gain was driven by a strong increase in a number of transactions, as well as a
slightly higher average ticket. The increase in transactions was due to a 5% increase in customer
traffic count, combined with a similar increase in the conversion rate. The increase in the average
ticket was the result of a higher average retail selling price, partially offset by a decline in
items per transaction.


<P align="left" style="font-size: 8pt">During the quarter, we saw strong sales results across the country with no discernible differences
in performance from a geographic standpoint. Eleven of our 13 merchandise categories performed
above plan during the quarter with the strongest results coming from our wall decor, seasonal and
gift categories.


<P align="left" style="font-size: 8pt">At the end of the quarter we operated 279 stores, made up of 213 off-mall stores and 66 mall
stores, representing a 76% off mall, 24% mall venue distribution.


<P align="left" style="font-size: 8pt">As planned, total square footage under lease decreased 3% from the prior year, while total store
units declined by 8%.


<P align="left" style="font-size: 8pt">Gross profit margin for the fourth quarter increased 710 basis points to 45.7% of sales versus
38.6% in the prior year. The components of the increase in reported gross profit margin were as
follows. First, merchandise margin increased 560 basis points as a percentage of sales. We continue
to experience lower markdowns across our merchandise mix, resulting from improved product selection
and strong customer reception. In particular, our holiday seasonal assortment surpassed our sales
and margin plans and significantly outperformed the prior year.


<P align="left" style="font-size: 8pt">We also had an increase in our initial markup percentages, partly due to lower ocean freight rates
that have been impacted by oversupply issues in the shipping industry and the economic downturn.
The benefit from ocean freight rates accounted for approximately 100 basis points of the 560 basis
point increase in the merchandise margin.


<P align="left" style="font-size: 8pt">Second, store occupancy costs decreased 100 basis points as a percentage of sales. This decline
resulted from sales leverage, favorable lease renewals, the closure of underperforming stores and
above-plan new store openings in more attractive locations.


<P align="left" style="font-size: 8pt">Third, outbound freight costs decreased 40 basis points as a percentage of sales, reflecting a
decline in diesel fuel and leverage from the sales increase.


<P align="left" style="font-size: 8pt">Last, central distribution costs decreased 10 basis points as a percentage of sales as a result of
the sales increase.


<P align="left" style="font-size: 8pt">Operating expenses for the quarter were $31.3&nbsp;million or 21.9% of sales as compared to $31.0
million or 23.2% of sales for the prior-year quarter. Leverage from the sales increase led to
expense ratio improvement in store payroll, as well as fixed store and corporate operating
expenses. Additionally, insurance expense declined as a percentage of sales due to an adjustment
made in the prior year that increased our self-insurance reserves.


<P align="left" style="font-size: 8pt">Depreciation and amortization decreased to 130 basis points as a percentage of sales, reflecting
the larger reduction in capital expenditures during 2008 and the relatively low amount of cap-ex in
2009, combined with a decline in the store count.


<P align="left" style="font-size: 8pt">Income tax expense was $8.4&nbsp;million or 27.5% of pretax income, versus expense of 887,000 or 5.6% of
pretax income recorded in the prior-year quarter. Based on our fiscal 2009 results, we generated
sufficient pretax profit to allow us to reverse the remaining valuation allowance that was recorded
against our deferred tax assets. This reversal resulted in a lower effective rate in 2009 as
compared to a normalized tax rate.


<P align="left" style="font-size: 8pt">Reported net income for the quarter was $22.1&nbsp;million or $1.08 per diluted share as compared to net
income of $15&nbsp;million or $0.76 per diluted share in the prior-year quarter.


<P align="left" style="font-size: 8pt">As discussed in the release this morning, the reported tax rate for fiscal 2009 reflects the
reversal of a valuation allowance. We believe that expressing net income and earnings per share for
quarterly and annual fiscal 2009 results using a normalized rate is instrumental in judging our
performance for future periods when we expect to incur that normalized rate.


<P align="left" style="font-size: 8pt">Excluding adjustments to record a reduction in our valuation allowance on deferred taxes and the
recognition of certain income tax credits related to prior periods, we would have reported net
income of $28.7&nbsp;million or $1.42 per diluted share for the full year of fiscal 2009, and $18.8
million or $0.92 per share for the fourth quarter of fiscal 2009. For purposes of future
comparisons, we will continue to reconcile reported earnings per share figures for 2009 to earnings
per share figures that would have been reported excluding the impact of the reversal of the
valuation allowance.


<P align="left" style="font-size: 8pt">Turning to the balance sheet and the cash flow statement, inventories at January&nbsp;30, 2010 were on
plan at $39.4&nbsp;million or 141,000 per store as compared to $38.7&nbsp;million or 129,000 per store in the
prior-year quarter. While these numbers reflect an increase in inventory on a per-store basis, the
average store size increased 4.3% year over year. Additionally, we have increased our planned
inventory levels slightly to better meet customer demand in a period of increasing traffic.


<P align="left" style="font-size: 8pt">We expect to end the first quarter with inventory levels in the range of $38&nbsp;million to $40
million.


<P align="left" style="font-size: 8pt">At the end of the quarter, we had $76.4&nbsp;million in cash on hand, no borrowings were outstanding on
our revolving line of credit, and we had net availability under the line of credit of approximately
$21.5&nbsp;million. We did not borrow from our credit facility during the year, nor do we expect any
borrowings during fiscal 2010.


<P align="left" style="font-size: 8pt">Accounts payable levels increased to $15.6&nbsp;million versus $13.5&nbsp;million at the end of the
prior-year quarter as a result of a slight increase in inventory levels and the timing of
merchandise receipts and vendor payments.


<P align="left" style="font-size: 8pt">For the full year, cash flow from operations was $50&nbsp;million, reflecting the improvement in our
operating performance. Capital expenditures for the year were $10.3&nbsp;million, primarily related to
new store construction and investments in information technology.


<P align="left" style="font-size: 8pt">The final item I will cover before turning it back over to Robert is to provide some guidance on
our outlook for fiscal 2010. We have outlined our assumptions in detail in today&#146;s press release,
but let me cover some of the highlights.


<P align="left" style="font-size: 8pt">As it relates to store count, our expectations haven&#146;t changed from what we have previously
discussed. We expect to open a total of 30 to 40 stores in fiscal 2010 and close 15 to 20 stores
during the year. Most of these closings represent markets where we are pursuing or have identified
a relocation opportunity.


<P align="left" style="font-size: 8pt">Given our cash position and the attractive return we are experiencing on our new store investments,
we will pursue additional store opportunities if they become available, but only if the deals meet
our strict criteria as to location and as to price.


<P align="left" style="font-size: 8pt">Our top-line expectations are for total sales in 2010 to be above fiscal 2009 in the range of 5% to
8%. This level of sales increase would imply solid comp store growth combined with the sales lift
provided by higher volume new store openings, partially offset by closing stores.


<P align="left" style="font-size: 8pt">By year&#146;s end, we should begin to see year-over-year growth in the store base. However, the store
closings we completed in January will likely keep us down in store count for the majority of the
year. While we are not quite halfway through the first quarter, comp sales have continued on the
strong trend that we experienced during the second half of 2009.


<P align="left" style="font-size: 8pt">As we look beyond 2010 we are targeting annual net store unit growth of 10% and net square footage
growth of 15%.


<P align="left" style="font-size: 8pt">For the full year fiscal 2009, our merchandise margin improved 410 basis points over fiscal 2008 as
a result of a stronger, more productive assortment with lower markdowns, combined with a higher
initial markup that was partly due to lower freight rates on our import shipments. We do not
believe or expect such dramatic gains in merchandise margin in 2010. Freight costs from overseas
are increasing, and the margin comparisons get tougher, particularly in the second half.


<P align="left" style="font-size: 8pt">While merchandise margins have been strong to start the year, freight increases could merchandise
margin improvement more difficult as the year progresses.


<P align="left" style="font-size: 8pt">We finished fiscal 2009 with an operating margin of 11.6%, a high watermark since prior to our IPO
in 2002. We are targeting incremental improvement in our operating margin during 2010 and beyond
through continued strong merchandising; a renewed focus on customer service in our stores; lower
occupancy costs combined with more productive off-mall store locations; information technology
systems improvements; continued expense discipline; and leveraging our distribution infrastructure.


<P align="left" style="font-size: 8pt">Adjusted to eliminate the impact of the difference in effective tax rates, we would expect to
report an increase in earnings in fiscal 2010. We are projecting that our effective rate for 2010
will be in the range of 39% to 40%. By comparison, our full-year tax rate in fiscal 2009 was 26.4%.


<P align="left" style="font-size: 8pt">Reported full-year earnings in fiscal 2010 will likely decline versus 2009 due to the impact of
returning to the higher tax rate. These assumptions do not include the potential adverse
consequences to earnings performance related to any changes in the regulatory or legislative
environment or nonrecurring costs associated with major information technology projects. We will
report the earnings significance to these issues when we are better able to estimate the cost.


<P align="left" style="font-size: 8pt">From a cash flow standpoint, we expect to generate positive cash flow in 2010 and fully fund our
new store growth and technology improvements in both years through internally generated cash flow.
We do not anticipate any borrowings on our line of credit for the foreseeable future.


<P align="left" style="font-size: 8pt">Capital expenditures are currently anticipated to be between $25&nbsp;million and $28&nbsp;million in 2010
before landlord construction allowances for new stores.


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


<P align="left" style="font-size: 8pt">Robert Alderson  &#151; Kirkland&#146;s, Inc. &#151; President and CEO&nbsp;


<P align="left" style="font-size: 8pt">Thanks, Mike. We ended a wonderfully productive fiscal 2009 with a great fourth quarter. Our
annual earnings per share fully taxed were the highest of our public company life and future
positive earnings in all four quarters of the year. It was very rewarding to see strong sales and
margin momentum continue throughout the quarter, following the strong trends we enjoyed in the
third quarter.


<P align="left" style="font-size: 8pt">Contrary to the trend for the past few years, we expected the holiday season in fourth quarter
would be less promotional. That proved to be true and contributed to the quarter&#146;s strong margin
experience in earnings. The quarter was notable for its consistency in both results and merchandise
performance. We closed the third quarter with great performance from our Halloween Harvest seasonal
merchandise offering in tandem with very good early results from the Christmas seasonal items.


<P align="left" style="font-size: 8pt">The Christmas sales trends accelerated in fourth quarter with the most notable takeaway that we set
our floors to Christmas items later than in 2008, which seemed to match our customers&#146; seasonal
mood and provide a greater period of primary exposure for our core merchandise, which continues to
perform very well. While every holiday season will be different, we will remain appropriately
conservative on the allocation of funds to seasonal product in 2010.


<P align="left" style="font-size: 8pt">That said, we do continue to see opportunity in holiday seasonal for 2010 and beyond as we continue
to test product early in selected markets when possible, increase our allocation of the spend for
giftable items and take advantage of opportunities in seasonal decorating.


<P align="left" style="font-size: 8pt">Our annual value-rich Big Sale and After Christmas events again proved to be popular with
customers. We interjected several one- and two-day events throughout the season and quarter, all of
which were sales and traffic drivers and all of which were primarily communicated to our customers
through e-mail.


<P align="left" style="font-size: 8pt">The comp sales improvement in the fourth quarter featured mid-single digit traffic increases and a
similar increase in conversion. Such traffic and conversion improvement was prompted by our
merchandise resonating strongly with our customers, as evidenced by the large year-over-year
product margin gain and increases in both item retail and average ticket. Twelve of our 13
merchandise categories either generated positive comparable sales versus last year or exceeded plan
during the fourth quarter and for fiscal 2009 with the notable exception being candles.


<P align="left" style="font-size: 8pt">Our long practiced combination of style, quality and price continues to present great and much
appreciated value to our loyal customers. As for the state of the economy that affects those
customers, the strong traffic results in the second half gives us some encouragement that shoppers
have adjusted somewhat to the economic environment resulting from the 2008 fall market crash and
its aftermath despite persistent problems in the areas of consumer confidence, employment and
housing.


<P align="left" style="font-size: 8pt">We continue to watch those metrics closely and have not changed our opinion that a return to
pre-crash spending habits will be slow and quite sporadic. In fact, recently reported numbers
suggests some worsening of each of those metrics into 2010.


<P align="left" style="font-size: 8pt">Significant near-term improvement in credit availability for commercial and residential development
projects appears improbable. Such conditions suggest a protracted return to a more normal pre-2008
economy and an uncertain return to shopping center development. We believe that the totality of
these problems have created a paradigm shift in consumer attitudes, which will benefit Kirkland&#146;s
for several if not many years.


<P align="left" style="font-size: 8pt">Along with earnings-per-share gains, our proudest achievement in 2009 was the strong increase in
operating margin, as merchandise performance decreased occupancy costs, exceptionally strong
performance from our new stores and continued financial discipline generated a historic high in
that important performance measurement. While the gain in operating margin was 910 basis points, we
believe we have the potential for continued upside in 2010 and beyond as we accelerate our organic
growth, refine our marketing reach, add an e-commerce capability late in the year, and continue to
reap the benefits of a larger, more productive and profitable store off-mall.


<P align="left" style="font-size: 8pt">We would normally add incremental margin gains and product to the list of potential operating
margin increase contributors and such gains are possible, but we&#146;re mindful of the potential drag
in 2010 from recent large increases in transportation costs from China, which may begin to impact
product margin by the second quarter and throughout the remainder of the year.


<P align="left" style="font-size: 8pt">We enjoyed tremendous results from our 2009 new stores. While most have not been open a full year,
17 of the 18 have full-year run rates at or considerably above plan. Class averaged over 7,600
square feet in size. We have opened three new stores so far in 2010 with similar trends. We expect
the 2010 class to meet the outstanding performance of the 2009 class.


<P align="left" style="font-size: 8pt">As mentioned on last call, our average store count throughout the year will not increase much until
late in 2010, but we expect to reflect the benefit of net store growth in 2011 and beyond. The
availability of new store opportunities in 2010 continues to be adequate, but availability in
pricing would be helped by return of new center development, which is not expected to be very
noticeable until 2012.


<P align="left" style="font-size: 8pt">Kirkland&#146;s merchandise offering, strong balance sheet, sales history, traffic generation, space
flexibility and streamlined decision process helps Kirkland&#146;s react quickly to vacancies in
dominant strip centers.


<P align="left" style="font-size: 8pt">The right space in the right market at the right price continues to be our standard as we return to
net store growth in 2010 and beyond. We continue to operate a number of mall stores on a short-term
basis while we seek replacements, as negotiated rent reductions have made the stores profitable at
acceptable levels in the near term.


<P align="left" style="font-size: 8pt">The efforts of a talented, cohesive team in 2008 and &#145;09 have built tremendous momentum in our
business, which we are gratified to report has continued quarter to date in 2010. We&#146;re really
pleased with the increase in traffic that has continued into the first quarter. We&#146;re working hard
to capitalize on that momentum. We have produced strongly improved year-over-year financial results
during a very difficult time in our country&#146;s economy.


<P align="left" style="font-size: 8pt">In 2010 and beyond, we don&#146;t expect a strong tail wind from near-term economic improvement and
understand that we have to continue to provide our customers with compelling merchandise in better,
more enjoyable shopping locations and to give them reasons to shop with us by improving their
experience. We also have to deliver our story to the customer in increasingly better ways. That is
our commitment.


<P align="left" style="font-size: 8pt">We are mindful of the challenges ahead but excited with where we are financially and operationally.


<P align="left" style="font-size: 8pt">We thank you for your time and interest today, and we hope to see you in our stores very soon.
Operator, Mike and I will now take questions.


<P align="left" style="font-size: 8pt">QUESTION AND ANSWER


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


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


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


<P align="left" style="font-size: 8pt">Hi, good morning, and congratulations on a terrific quarter.


<P align="left" style="font-size: 8pt">Robert Alderson  &#151; Kirkland&#146;s, Inc. &#151; President and CEO&nbsp;


<P align="left" style="font-size: 8pt">Thanks.


<P align="left" style="font-size: 8pt">Mike Madden  &#151; Kirkland&#146;s, Inc. &#151; SVP and CFO&nbsp;


<P align="left" style="font-size: 8pt">Thanks, Dave.


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


<P align="left" style="font-size: 8pt">Could you talk a little bit about the new store productivity and why the class of 2009 is so
much more productive than the other years in which you were off-mall, in terms of the types of
centers you might be going into now versus the last several years?


<P align="left" style="font-size: 8pt">Robert Alderson  &#151; Kirkland&#146;s, Inc. &#151; President and CEO&nbsp;


<P align="left" style="font-size: 8pt">David, I think we&#146;ve learned somewhat through trial and error, beginning in 2004 and &#145;05 when
we began to move off-mall that the dominant strip center in a market with the kind of co-tenancy
that you would expect would be helpful to our category makes the most sense. And that strip center
is not an unanchored lifestyle center, and it&#146;s not typically a community center.


<P align="left" style="font-size: 8pt">But it&#146;s usually a larger strip center, and it would be dominated by the names that you know well.
And those would be Targets and Bed Baths and Marshall&#146;s and Ross and Dick&#146;s and Barnes & Noble. I
mean all the people that you would expect to see in one of the better strip centers today make
really good partners for us. As we have a great value message and typically that&#146;s a center that
has great traffic and typically a really good location. So it seems to work really well.


<P align="left" style="font-size: 8pt">We have a little bit larger store, and that allows us to have a little bit more enjoyable shopping
venue for the customer, given the number of SKUs that we offer. And it makes it much more
convenient for the customer to take that merchandise to their car. So all in all it just makes for
a better environment, and it&#146;s been much more productive.


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


<P align="left" style="font-size: 8pt">Is there the opportunity to take some of the earlier conversions, some of the earlier off-mall
stores and put them in more of the power centers that you&#146;re talking about?


<P align="left" style="font-size: 8pt">Robert Alderson  &#151; Kirkland&#146;s, Inc. &#151; President and CEO&nbsp;


<P align="left" style="font-size: 8pt">We look at it all the time, exactly what you&#146;re talking about. We would love to, of course,
reposition &#151; and that&#146;s really what we&#146;re trying to do with the mall stores that we continue to
operate. As you have followed us, you know that we have renegotiated the rents in those mall
centers to make them productive while we wait for the right opportunity to open. And that serves
both our interests and the interests of the mall landlord, but we do expect to move those when
possible. There will be a few that won&#146;t but that&#146;s to be expected.


<P align="left" style="font-size: 8pt">And as we see some of the earlier lifestyle centers that are typically smaller, maybe in the high
4000&#146;s, or 5,000 square-foot range, we&#146;ll look to move those to the dominant power center also.


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


<P align="left" style="font-size: 8pt">Thanks, Robert. And as you think about the merchandising and what a good job you guys seem to
be doing with that, how do you gain comfort that the momentum will continue until the second half
of this year? And you&#146;ve got some pretty tough comparisons. Do you think that it&#146;s fair to assume
that you can comp positively against the double-digit numbers last year?


<P align="left" style="font-size: 8pt">Robert Alderson  &#151; Kirkland&#146;s, Inc. &#151; President and CEO&nbsp;


<P align="left" style="font-size: 8pt">Well, I think you obviously hope so and you work for that. We do an awful lot of new product
development. And we are, as you know, operating on a merchandise model which represents a lot of
speed. We move things through very quickly, and we show the customer a lot of new ideas. And as we
do that, we are able to capitalize on the ones that really work well because of short product
cycles that we have.


<P align="left" style="font-size: 8pt">So I think we are resonating well with customers in terms of the prices we are offering. And we are
showing them a lot of new things which cause them to make repetitive visits to the store. So I feel
good about the back half. I think we&#146;ll do a good job with seasonal in the back half of 2010. We&#146;re
already working on it right now; we&#146;re well into it. So, yes, I feel good about the back half.
We&#146;ll see how the economy is, and hopefully we&#146;ll go into the back half with very strong momentum.


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


<P align="left" style="font-size: 8pt">Great. Thank you, and good luck.


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


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


<P align="left" style="font-size: 8pt">Neely Tamminga  &#151; Piper Jaffray & Co.&nbsp; &#151; Analyst


<P align="left" style="font-size: 8pt">Oh, great, thanks. But I&#146;m going to start with a congratulations. I think you guys have done
an absolutely fabulous job this year and in the prior year.


<P align="left" style="font-size: 8pt">So hey, just this seems really kind of a technical question, but help us reframe &#151; I don&#146;t think I
heard this earlier &#151; but help us reframe our minds on what the four-wall model looks like in terms
of payback and initial investment and things like that. I don&#146;t think &#151; and we&#146;ve talked about the
productivity improving and that&#146;s, I think, evident in the numbers. But as you guys reaccelerate
growth, what should we be looking on that line by line item for the four wall?


<P align="left" style="font-size: 8pt">Mike Madden  &#151; Kirkland&#146;s, Inc. &#151; SVP and CFO&nbsp;


<P align="left" style="font-size: 8pt">The way we&#146;re looking at that now, Neely, is we are initially, as an average, if you look at a
class of stores you are about to build, we&#146;re looking at $1.5&nbsp;million as the kind of minimum target
for that. The buildout costs and the inventory costs come to collectively in a range of $300,000.
And at that level of sales volume, we would get payback in year one for that. And that&#146;s what we&#146;re
seeing; that&#146;s what we have seen. And the 2009 class actually outperformed that a little bit. So to
the extent we can do that, that&#146;s to the good. But that&#146;s the base model that we are working from.


<P align="left" style="font-size: 8pt">Neely Tamminga  &#151; Piper Jaffray & Co.&nbsp; &#151; Analyst


<P align="left" style="font-size: 8pt">And Mike, just to be real technical here, the $300,000, is that net of any sort of landlord
allowances?


<P align="left" style="font-size: 8pt">Mike Madden  &#151; Kirkland&#146;s, Inc. &#151; SVP and CFO&nbsp;


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


<P align="left" style="font-size: 8pt">Neely Tamminga  &#151; Piper Jaffray & Co.&nbsp; &#151; Analyst


<P align="left" style="font-size: 8pt">Or is that on a gross basis?


<P align="left" style="font-size: 8pt">Mike Madden  &#151; Kirkland&#146;s, Inc. &#151; SVP and CFO&nbsp;


<P align="left" style="font-size: 8pt">That&#146;s on a net basis.


<P align="left" style="font-size: 8pt">Neely Tamminga  &#151; Piper Jaffray & Co.&nbsp; &#151; Analyst


<P align="left" style="font-size: 8pt">On a net basis. And then in terms of the payback, just take us back to ancient history, you
know, what, 10&nbsp;years ago, would that payback have looked similar or is this just that much better?


<P align="left" style="font-size: 8pt">Mike Madden  &#151; Kirkland&#146;s, Inc. &#151; SVP and CFO&nbsp;


<P align="left" style="font-size: 8pt">I think it&#146;s better. I think if I looked back, I think the buildout would have been more on a
per square foot basis. We would&#146;ve gotten less landlord allowance so the payback would have been in
the range of 50% to 75% in year one as opposed to 100%.


<P align="left" style="font-size: 8pt">Neely Tamminga  &#151; Piper Jaffray & Co.&nbsp; &#151; Analyst


<P align="left" style="font-size: 8pt">That&#146;s what this girl was looking for. Thank you, guys, and good luck.


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


<P align="left" style="font-size: 8pt">(Operator Instructions). Brad Leonard, BML Capital Management.


<P align="left" style="font-size: 8pt">Brad Leonard  &#151; BML Capital Management, LLC &#151; Analyst


<P align="left" style="font-size: 8pt">Hey, guys. Great quarter, again. It&#146;s like a broken record here. A good one though, right?


<P align="left" style="font-size: 8pt">Robert Alderson  &#151; Kirkland&#146;s, Inc. &#151; President and CEO&nbsp;


<P align="left" style="font-size: 8pt">Yes, we enjoyed it. Thanks, Brad.


<P align="left" style="font-size: 8pt">Brad Leonard  &#151; BML Capital Management, LLC &#151; Analyst


<P align="left" style="font-size: 8pt">Hey, real quick. I know you haven&#146;t disclosed this yet and it will probably be out in the K,
but sales per square foot on a trailing 12&nbsp;months or for the year?


<P align="left" style="font-size: 8pt">Mike Madden  &#151; Kirkland&#146;s, Inc. &#151; SVP and CFO&nbsp;


<P align="left" style="font-size: 8pt">Going to be in the range of $230, $235. And that&#146;s on the total square footage. That&#146;s not
accounting for splitting the back room out or anything like that. That&#146;s total square footage.


<P align="left" style="font-size: 8pt">Brad Leonard  &#151; BML Capital Management, LLC &#151; Analyst


<P align="left" style="font-size: 8pt">Sure. So that&#146;s down then from let&#146;s say in &#151; I don&#146;t know when you guys peaked. I&#146;m out of
my office today. But maybe at like, what did you peak, at like $270, or maybe even higher than
that?


<P align="left" style="font-size: 8pt">Mike Madden  &#151; Kirkland&#146;s, Inc. &#151; SVP and CFO&nbsp;


<P align="left" style="font-size: 8pt">It was close to $300 when you were looking at a 4,000-foot mall store, yes. Back, and you&#146;re
talking about almost 10&nbsp;years ago at that point.


<P align="left" style="font-size: 8pt">Brad Leonard  &#151; BML Capital Management, LLC &#151; Analyst


<P align="left" style="font-size: 8pt">Okay. What kind of, I mean &#151; obviously if you just repeated these numbers forever, it would
be great. But do you think there&#146;s &#151; I mean, what is your target? Do you think you can get to a
higher number on a sales per square foot? Obviously, you comp up at will. But what are your
thoughts on that long term?


<P align="left" style="font-size: 8pt">Robert Alderson  &#151; Kirkland&#146;s, Inc. &#151; President and CEO&nbsp;


<P align="left" style="font-size: 8pt">I guess we would like to think about driving the unit sales of the store more than the sales
per square foot, if that make sense to you. We have opportunity in other categories that we are not
able really to do as well with in the size space that we handle now. We are not going to get crazy
about the size of the stores, but we think we have an opportunity to continue to be a bit larger
and to make the stores much more productive on an average unit basis. So I think the sales per
square foot will follow. But we are really looking to expand the ability of that store more than
just trying to drive sales per square foot.


<P align="left" style="font-size: 8pt">Mike Madden  &#151; Kirkland&#146;s, Inc. &#151; SVP and CFO&nbsp;


<P align="left" style="font-size: 8pt">And, Brad, on that metric, in 2009, that number is about $1.370&nbsp;million average unit volume.
And that is still below the peak that was about $1.425&nbsp;million or so in the 2002, 2003 range.


<P align="left" style="font-size: 8pt">And if we were to perform at that 5% to 8% total sales increase that we put out this morning, we
would eclipse that peak this year. (multiple speakers)


<P align="left" style="font-size: 8pt">Robert Alderson  &#151; Kirkland&#146;s, Inc. &#151; President and CEO&nbsp;


<P align="left" style="font-size: 8pt">As long as space continues to be as reasonable as it is and we can make that productive and
give us some upside in the merchandising side, I really think it continues to be a good way to
think about how to run the business.


<P align="left" style="font-size: 8pt">Brad Leonard  &#151; BML Capital Management, LLC &#151; Analyst


<P align="left" style="font-size: 8pt">Yes, because the models would be a little bit different on the new ones because your occupancy
is so much lower than the old mall stores. And so &#151;


<P align="left" style="font-size: 8pt">Robert Alderson  &#151; Kirkland&#146;s, Inc. &#151; President and CEO&nbsp;


<P align="left" style="font-size: 8pt">That&#146;s right. It is bigger and it is cheaper; that&#146;s right.


<P align="left" style="font-size: 8pt">Brad Leonard  &#151; BML Capital Management, LLC &#151; Analyst


<P align="left" style="font-size: 8pt">And the new stores that you are targeting this year, are they 7,000 to 10,000 square feet,
then?


<P align="left" style="font-size: 8pt">Robert Alderson  &#151; Kirkland&#146;s, Inc. &#151; President and CEO&nbsp;


<P align="left" style="font-size: 8pt">Yes, generally, that is right. And we will occasionally find one that will &#151; that we can have
a bit more space at the same cost for the smaller size, and when we have that opportunity we will
take it. Because it helps us do the things that we were talking about, as well as kind of
understand how to operate in that larger space, if we want to do that downstream.


<P align="left" style="font-size: 8pt">Brad Leonard  &#151; BML Capital Management, LLC &#151; Analyst


<P align="left" style="font-size: 8pt">Okay. And then I guess lastly on these merchandise margins, that is just unbelievable, the
improvement you have seen over a two-year period. I mean it&#146;s &#151; so it was 500 &#151; what was it this
quarter? 500 and some basis points?


<P align="left" style="font-size: 8pt">Mike Madden  &#151; Kirkland&#146;s, Inc. &#151; SVP and CFO&nbsp;


<P align="left" style="font-size: 8pt">560.


<P align="left" style="font-size: 8pt">Brad Leonard  &#151; BML Capital Management, LLC &#151; Analyst


<P align="left" style="font-size: 8pt">560.&nbsp;And then on top of &#151; Q4 last year was &#151; I don&#146;t have my notes in front of me. But it
was 200 or 300 basis &#151; maybe more. I don&#146;t even know. I don&#146;t remember offhand what it was last
year. I mean the two-year improvement in merchandise margins is remarkable.


<P align="left" style="font-size: 8pt">And I guess where I&#146;m going with this is that it seemed like the whole sector is kind of getting
better on the merchandise margins. Is it &#151; obviously consumer spending is coming back and less
clearance and everybody has got their inventories under control and we have had some store closures
and all of those things. I mean does that kind of just add up to being &#151; and you guys are
obviously leading the pack as far as the efficiency. But do you think all of those things are just
kind of pushing these merchandise margins back to where they were, back in &#145;02 and &#145;03? Just any
thoughts on that would be appreciated.


<P align="left" style="font-size: 8pt">Robert Alderson  &#151; Kirkland&#146;s, Inc. &#151; President and CEO&nbsp;


<P align="left" style="font-size: 8pt">Well, we are actually running well ahead of merchandise margins in that era of the mall store.
We went public in midyear 2002 off of a very strong 2001. And we had reasonable merchandise margins
in that time period. But we are exceeding that by several hundred basis points now. And I think
really it&#146;s a function of a merchant team that is very talented and it&#146;s a function of a way that
we source. And it&#146;s a function of the way that we flow it through the store and the way that we
plan. We have a much stronger planning capability than we had in that time period. And we are a
much more efficient user of inventory today than we were in the 2001 to 2005 timeframe.


<P align="left" style="font-size: 8pt">So, I think it&#146;s a lot about talent improvement, philosophy of operation and ability to execute. I
think that&#146;s what has driven the improvement. There&#146;s no magic. It&#146;s a lot of hard work and really
a strong understanding of who our customer is and what they will pay for an item and what kind of
style that item should be. And when you get it and you see a trend and an opportunity you have to
really execute on it hard. And that is what we do.


<P align="left" style="font-size: 8pt">Brad Leonard  &#151; BML Capital Management, LLC &#151; Analyst


<P align="left" style="font-size: 8pt">Well, great job, again, guys. Keep up the good work.


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


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


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


<P align="left" style="font-size: 8pt">Hi thanks. Just thinking about the higher transportation costs. Obviously, most retailers will
be facing the same issue this year. And I&#146;m wondering if you all with your lower price points and
your non-branded merchandise, whether you have at least some opportunity to pass on some of those
costs to the consumer if we have a better economy this year.


<P align="left" style="font-size: 8pt">Robert Alderson  &#151; Kirkland&#146;s, Inc. &#151; President and CEO&nbsp;


<P align="left" style="font-size: 8pt">You know I think we are looking, David, always looking for the right selling price. And
sometimes we might have some opportunity on the upside. We are generally looking for a way to
deliver a better price to the customer as opposed to a higher price. So we tend to try to find the
spread with the vendor and through our own process as opposed to putting it on the price side.


<P align="left" style="font-size: 8pt">But in some instances, we are able to find a price that better reflects where it should be in the
marketplace given what it costs. So yes, some but hopefully we won&#146;t have to do that very much.


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


<P align="left" style="font-size: 8pt">We have no more questions on the telephone lines at the moment, Mr.&nbsp;Alderson. I will now turn
the call back to you. Please proceed with your presentation or closing remarks.


<P align="left" style="font-size: 8pt">Robert Alderson  &#151; Kirkland&#146;s, Inc. &#151; President and CEO&nbsp;


<P align="left" style="font-size: 8pt">Well, thanks, everyone. We appreciate your time and interest. And we look forward to talking
to you again after the first quarter. Take care.


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


<P align="left" style="font-size: 8pt">Ladies and gentlemen, that does conclude the conference call for today. We thank you for your
participation and ask that you please disconnect your lines. Have a great day, everyone.



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




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