<SEC-DOCUMENT>0001299933-13-001020.txt : 20130529
<SEC-HEADER>0001299933-13-001020.hdr.sgml : 20130529
<ACCEPTANCE-DATETIME>20130528174449
ACCESSION NUMBER:		0001299933-13-001020
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20130523
ITEM INFORMATION:		Results of Operations and Financial Condition
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20130529
DATE AS OF CHANGE:		20130528

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:			0130

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-49885
		FILM NUMBER:		13876107

	BUSINESS ADDRESS:	
		STREET 1:		2501 MCGAVOCK PIKE
		STREET 2:		SUITE 1000
		CITY:			NASHVILLE
		STATE:			TN
		ZIP:			37214
		BUSINESS PHONE:		615-872-4800

	MAIL ADDRESS:	
		STREET 1:		2501 MCGAVOCK PIKE
		STREET 2:		SUITE 1000
		CITY:			NASHVILLE
		STATE:			TN
		ZIP:			37214

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	KIRKLANDS INC
		DATE OF NAME CHANGE:	19980219
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>htm_47821.htm
<DESCRIPTION>LIVE FILING
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<TITLE> Kirkland's, Inc. (Form: 8-K) </TITLE>
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		UNITED STATES<BR>
	SECURITIES AND EXCHANGE COMMISSION
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	WASHINGTON, D.C. 20549
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	FORM 8-K
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	CURRENT REPORT
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	Pursuant to Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934
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	Date of Report (Date of Earliest Event Reported):
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	&nbsp;
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	May 23, 2013
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	Kirkland's, Inc.
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<BR>__________________________________________<BR>
	(Exact name of registrant as specified in its charter)
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	Tennessee
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	000-49885
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	621287151
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_____________________<BR>
	(State or other jurisdiction
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_____________<BR>
	(Commission
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	(I.R.S. Employer
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	of incorporation)
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	File Number)
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	Identification No.)
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	2501 McGavock Pike, Suite 1000, Nashville, Tennessee
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	&nbsp;
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	37214
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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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	615-872-4800
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	Not Applicable
<BR>______________________________________________<BR>
	Former name or former address, if changed since last report
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	&nbsp;
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any
of the following provisions:</FONT>
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<P><FONT SIZE="2">
[&nbsp;&nbsp;]&nbsp;&nbsp;Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)<br>
[&nbsp;&nbsp;]&nbsp;&nbsp;Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)<br>
[&nbsp;&nbsp;]&nbsp;&nbsp;Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))<br>
[&nbsp;&nbsp;]&nbsp;&nbsp;Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))<br>
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<B>
	Item 2.02 Results of Operations and Financial Condition.
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On May 23, 2013, Kirkland's Inc. (the "Company") issued a press release and conducted a conference call regarding its sales and earnings results for its first fiscal quarter period ended May 4, 2013 (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><br><br><br><br>
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	Item 9.01 Financial Statements and Exhibits.
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d) Exhibits<br><br>99.1 Press Release dated May 23, 2013 announcing the Company's first fiscal quarter financial results.<br><br>99.2 Transcript of the May 23, 2013 conference call conducted by the Company. <br><br><br><br><br>
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	SIGNATURES
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	Pursuant to the requirements of the Securities Exchange Act of 1934, the
	registrant has duly caused this report to be signed on its behalf by the
	undersigned hereunto duly authorized.
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	Kirkland's, Inc.
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	&nbsp;&nbsp;
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<I>
	May 28, 2013
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	&nbsp;
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<I>
	By:
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	&nbsp;
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<I>
	/s/ W. Michael Madden
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<BR>
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	&nbsp;
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<I>
	Name: W. Michael Madden
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<I>
	Title: Senior Vice President and Chief Financial Officer
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	Exhibit&nbsp;Index
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	Exhibit No.
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	Description
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	99.1
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	&nbsp;
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<TD ALIGN="LEFT" VALIGN="TOP" WIDTH="77%">
<FONT SIZE="2">
Press release dated May 23, 2013, announcing the Company's first fiscal quarter financial results
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	99.2
</DIV>
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	&nbsp;
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Transcript of the May 23, 2013 conference call conducted by the Company
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<TYPE>EX-99.1
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<P align="left" style="font-size: 10pt"><FONT style="font-size: 12pt"><img src="e38314-131481729457778a43_1.jpg">
</FONT>

<P align="right" style="font-size: 12pt"><FONT style="font-size: 22pt">News Release</FONT>


<DIV align="center">
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    <TD width="13%">&nbsp;</TD>
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    <TD width="39%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="43%">&nbsp;</TD>
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    <TD align="left" valign="top"><FONT style="font-size: 11.5pt">Contact:</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT style="font-size: 11.5pt">W. Michael Madden<BR>
Senior Vice President &#038; CFO<BR>
(615)&nbsp;872-4800</FONT>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT style="font-size: 11.5pt">Tripp Sullivan<BR>
Corporate Communications, Inc.<BR>
(615)&nbsp;324-7335</FONT></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 11.5pt"><FONT style="font-size: 12.5pt"><B>KIRKLAND&#146;S REPORTS FIRST QUARTER 2013 RESULTS</B></FONT>



<P align="left" style="font-size: 12.5pt"><FONT style="font-size: 11pt">NASHVILLE, Tenn. (May&nbsp;23, 2013) &#151; Kirkland&#146;s, Inc. (NASDAQ: KIRK) today reported financial
results for the 13-week period ended May&nbsp;4, 2013.
</FONT>

<P align="left" style="font-size: 11pt">Net sales for the 13&nbsp;weeks ended May&nbsp;4, 2013, increased 3.5% to $101.2&nbsp;million compared with
$97.8&nbsp;million for the prior-year quarter. Comparable store sales, including e-commerce sales, for
the first quarter of fiscal 2013 decreased 2.3% compared with a decrease of 1.2% in the prior-year
quarter. Kirkland&#146;s opened 1 store and closed 7 during the first quarter of fiscal 2013, bringing
the total number of stores to 317 at quarter end.


<P align="left" style="font-size: 11pt">The Company reported net income of $1.8&nbsp;million, or $0.10 per diluted share, for the first quarter
of fiscal 2013 compared with net income of $2.0&nbsp;million, or $0.10 per diluted share, for the first
quarter of fiscal 2012 and previous net income guidance of $0.02 to $0.05 per diluted share.


<P align="left" style="font-size: 11pt">Robert Alderson, Kirkland&#146;s President and Chief Executive Officer, said, &#147;Although we had a slow
start to February consistent with our cautious outlook for the first half of the year, we
experienced an improvement in trends later in the quarter. The better sales and margin performance
in the latter weeks of the quarter exceeded our expectations and has modestly improved our outlook.
However, there is still much work to do in firmly establishing a positive merchandising trend as
well as leveraging our ongoing investments in technology, growing e-commerce, improving traffic,
focusing on tight expense controls and executing our new branding initiatives.&#148;


<P align="left" style="font-size: 11pt"><I>Updated Fiscal 2013 Outlook</I>

<DIV align="center">
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    <TD align="left" valign="top"><B>Store Base:</B>
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">For the 52-week period ending February&nbsp;1, 2014 (&#147;fiscal 2013&#148;),<BR>
the Company expects to open approximately 25 new stores and close<BR>
approximately 15 stores. New store openings will be weighted more<BR>
toward the second and third quarters of the year, while closings<BR>
will be weighted more toward the first half of the year.</DIV></TD>
</TR>
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    <TD align="left" valign="top"><B>Sales</B>:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Total sales for the 52-week fiscal 2013 are expected to increase<BR>
approximately 3% to 5% compared with 53-week fiscal 2012. This<BR>
level of total sales performance implies comparable store sales<BR>
results of flat to a slight increase for fiscal 2013.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD align="left" valign="top"><B>Margins</B>:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Based on the current outlook, inbound freight costs should be<BR>
higher for the second quarter, but improve in the second half of<BR>
the year offsetting the negative first half margin impact. A<BR>
strict focus on operating expense controls, combined with a more<BR>
conservative store opening plan, should position the Company to<BR>
better leverage any upside to its current revenue projections.<BR>
However, the Company expects investments in key personnel, as<BR>
well as modest increases in marketing and e-commerce expenses to<BR>
offset some of the expense efficiencies.</DIV></TD>
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<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: 11pt">KIRK Reports First Quarter Fiscal 2013 Results
<BR>
Page 2
<BR>
May&nbsp;23, 2013
</FONT>
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    <TD align="left" valign="top"><B>Earnings</B>:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Based on the above assumptions, the Company expects fiscal 2013<BR>
earnings per share to be in the range of $0.75 to $0.85. The<BR>
Company expects its full year effective tax rate to be<BR>
approximately 38.5%.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD align="left" valign="top"><B>Cash Flow</B>:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Capital expenditures in fiscal 2013 are estimated to range between<BR>
$20&nbsp;million and $23&nbsp;million. Based on the above assumptions, the<BR>
Company expects to be cash flow positive in fiscal 2013.</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 11pt"><I>Second Quarter Fiscal 2013 Outlook</I>
<BR>
For the second quarter ending August&nbsp;3, 2013, the Company expects a net loss of $0.08 to $0.11 per
diluted share compared with a net loss of $0.11 per share in the prior-year quarter. Net sales are
expected to be $97&nbsp;million to $98&nbsp;million, with a nominal decrease to a nominal increase in
comparable store sales. The Company expects to open approximately 6 stores and close approximately
5 stores during the quarter.


<P align="left" style="font-size: 11pt"><I>Investor Conference Call and Web Simulcast</I>
<BR>
Kirkland&#146;s will host a conference call at 11:00&nbsp;a.m.&nbsp;ET today to discuss the first quarter results.
The number to call for the interactive teleconference is (212)&nbsp;231-2919. A replay of the conference
call will be available through Thursday, May&nbsp;30, 2013, by dialing (402)&nbsp;977-9140 and entering the
confirmation number, 21646240.


<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
website <U>www.kirklands.com</U> under Investor Relations or
<U>http://www.videonewswire.com/event.asp?id=93882</U> on May&nbsp;23, 2013, 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>About Kirkland&#146;s, Inc.</I>
<BR>
Kirkland&#146;s, Inc. was founded in 1966 and is a specialty retailer of home d&#233;cor in the United
States. Although originally focused in the Southeast, the Company has grown beyond that region and
currently operates 315 stores in 35 states.&nbsp; The Company&#146;s stores present a broad selection of
distinctive merchandise, including framed art, mirrors, candles, lamps, picture frames, accent
rugs, garden accessories and artificial floral products.&nbsp; The Company&#146;s stores also offer an
extensive assortment of gifts, as well as seasonal merchandise.&nbsp; More information can be found at
<U>www.kirklands.com</U>.


<P align="left" style="font-size: 11pt"><FONT style="font-size: 10pt"><I>Forward-Looking Statements</I>
</FONT><BR>
<FONT style="font-size: 10.5pt"><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;18, 2013.
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>
</FONT>

<P align="center" style="font-size: 10.5pt"><FONT style="font-size: 11pt">-MORE-</FONT>



<P align="left" style="font-size: 11pt"><FONT style="font-size: 11.5pt">KIRK Reports First Quarter Results
<BR>
Page 3
<BR>
May&nbsp;23, 2013
</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>
(dollars 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="72%">&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="3%">&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="7" style="border-bottom: 1px solid #000000">13-Week Period Ended</TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">May 4,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">April 28,</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">2013</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2012</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">$</TD>
    <TD align="right">101,233</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">97,788</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">61,827</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,319</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">39,406</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,469</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">32,779</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,284</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,791</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,015</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">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,836</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,170</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other (income)&nbsp;expense, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3</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">2,830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,173</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">1,057</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,218</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">$</TD>
    <TD align="right">1,773</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,955</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">$</TD>
    <TD align="right">0.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.11</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">$</TD>
    <TD align="right">0.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.10</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">17,083</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,269</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">17,433</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,772</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 First Quarter Results
<BR>
Page 4
<BR>
May&nbsp;23, 2013


<P align="left" style="font-size: 11.5pt"><FONT style="font-size: 11pt">KIRKLAND&#146;S, INC.
<BR>
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
<BR>
(dollars in thousands)
</FONT>
<DIV align="center">
<TABLE style="font-size: 11pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="61%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">May 4, 2013</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">February 2, 2013</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">April 28, 2012</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">ASSETS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Current assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">74,111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">67,797</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">73,162</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">47,889</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,577</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,484</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Income taxes receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,638</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,725</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">6,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,370</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,118</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">131,229</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128,346</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">130,489</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">76,964</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78,499</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,414</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">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,150</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,559</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,496</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">209,873</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">208,404</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">194,549</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">LIABILITIES AND SHAREHOLDERS&#146; EQUITY</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Current liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">20,933</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">21,642</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">18,050</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">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">520</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,931</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">21,719</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,637</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,652</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,618</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">3,057</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Deferred rent and other long-term
liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,778</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,230</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,633</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,487</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,529</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,251</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120,386</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">117,875</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">117,298</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total liabilities and shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">209,873</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">208,404</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">194,549</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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



<P align="left" style="font-size: 11.5pt">KIRK Reports First Quarter Results
<BR>
Page 5
<BR>
May&nbsp;23, 2013


<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>
(dollars in thousands)
</FONT>
<DIV align="center">
<TABLE style="font-size: 11pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="62%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">13-Week Period Ended</TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">May 4, 2013</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">April 38, 2012</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">$</TD>
    <TD align="right">8,561</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(2,733</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,322</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,109</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,119</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: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 (decrease)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,314</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9,961</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67,797</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83,123</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">$</TD>
    <TD align="right">74,111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">73,162</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">-END-</FONT>




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




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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>3
<FILENAME>exhibit2.htm
<DESCRIPTION>EX-99.2
<TEXT>
<!DOCTYPE html PUBLIC "-//W3C//DTD HTML 3.2//EN">
<HTML>
<HEAD>
<TITLE> EX-99.2 </TITLE>
</HEAD>
<BODY TEXT="#000000" BGCOLOR="#FFFFFF" ALINK="#0000FF" HLINK="#FF0000" VLINK="#800080">

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


<P align="center" style="font-size: 10pt"><FONT style="font-size: 12pt"><B>KIRKLANDS INC FIRST QUARTER 2013 CONFERENCE CALL</B></FONT>



<P align="center" style="font-size: 12pt"><B>Moderator: Robert Alderson, CEO<BR>
May&nbsp;23, 2013<BR>
10:00 am CT</B>


<DIV align="center">
<TABLE style="font-size: 12pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="14%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="86%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Operator:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ladies and gentlemen, thank you for standing by. Welcome to the Kirkland&#146;s Inc. First Quarter 2013 Conference<BR>
Call.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">During the presentation all participants will be in a listen-only mode. Afterwards we will conduct a<BR>
question-and-answer session. At that time if you have a question, please press the 1 followed by the 4 on<BR>
your telephone.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">If at any time during the conference you need to reach an operator, please press star, 0.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">As a reminder, this conference is being recorded, Thursday, May&nbsp;23, 2013.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I would now like to turn the conference over to Mr.&nbsp;Tripp Sullivan of Corporate Communications. Please go<BR>
ahead.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Tripp Sullivan:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thank you. Good morning, and welcome to this Kirkland&#146;s Inc. Conference Call to review the company&#146;s results<BR>
for the first quarter of fiscal 2013. On the call this morning are Robert Alderson, President and Chief<BR>
Executive Officer; and Mike Madden, Senior Vice President and Chief Financial Officer.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">The results, as well as notice of the accessibility in this conference call on a listen-only basis over the<BR>
Internet, were released earlier this morning in a press release that&#146;s been covered by the financial media.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Except for historical information discussed during this conference call, the statements made by company<BR>
management are forward-looking and made pursuant to the Safe Harbor provisions of the Private Securities<BR>
Litigation Reform Act of 1995.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Forward-looking statements involve known and unknown risks and uncertainties which may cause Kirkland&#146;s<BR>
actual results in future periods to differ materially from forecasted results. Those risks and uncertainties<BR>
are more fully described in Kirkland&#146;s filings with the Securities and Exchange Commission, including the<BR>
company&#146;s annual report on Form&nbsp;10-K filed on April&nbsp;18, 2013.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">With that said, I&#146;ll turn the call over to Mike for a review of the financial results. Mike?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thank you, Tripp, and good morning, everybody.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">A strong finish to the first quarter, better-than-expected merchandise margin and the timing of certain<BR>
marketing expenses led to the outperformance versus our earnings guidance range.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">For the first quarter, net sales were $101.2&nbsp;million, a 3.5% increase versus the prior year quarter.<BR>
Comparable store sales, including e-commerce sales, decreased 2.3%. Comparable brick-and-mortar sales were<BR>
down 3.1%. E-commerce sales were $3.9&nbsp;million for the quarter, a 19.1% increase over the prior year quarter.<BR>
At the store level, the comp sale decline was driven by a 4% decline in transactions and a 1% increase in the<BR>
average ticket.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">The decrease in transactions resulted from a 7% decrease in traffic counts, offset by a 3% improvement in the<BR>
conversion rate. The increase in the average ticket was the result of an increase in items per transaction,<BR>
partly offset by a lower average retail selling price.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">From a geographic standpoint, sales results were mixed. On the positive side, comp sales results in the Gulf<BR>
Coast states were strongest, offset by weakness in the far West and some areas of the upper Midwest and<BR>
South. The important State of Texas, with over 60 stores, performed at the company average.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Merchandise categories showing strong comp performance were mirrors, lamps, wall d&#233;cor, and candles. These<BR>
increases were offset primarily by declines in art, furniture, and frames.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We opened one store and closed seven stores during the quarter, bringing us to 317 at quarter&#146;s end. 87% of<BR>
the stores were in off-mall venues and 13% were located in enclosed malls. And at the end of the quarter, we<BR>
had 2.32&nbsp;million square feet under lease. That&#146;s a 12.2% increase from the prior year. Average store size was<BR>
up 5.2% at 7,324 square feet.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Gross profit margin for the first quarter decreased 41 basis points to 38.9% of sales from 39.3% in the prior<BR>
year. The components of reported gross profit margin were as follows. First, merchandise margin decreased 38<BR>
basis points as a percentage of sales. As expected, higher inbound freight costs negatively affected the<BR>
margin during the quarter, providing a headwind of approximately 100 basis points.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Aside from the inbound freight pressure, merchandise margins actually improved year-over-year as a result of<BR>
a more effective, better-controlled promotional activity and an improving sales trend. The latter part of the<BR>
quarter provided the largest portion of the year-over-year merchandise margin lift.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Secondly, store occupancy costs were basically flat as a percentage of sales, decreasing seven basis points<BR>
versus the prior year, despite the negative comp performance. This decline can be attributed to additional<BR>
rent reductions and the closure of under &#151; or unproductive stores.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Third, outbound freight costs were also flat as percent of sales, reflecting lower diesel costs and lower<BR>
shipping charges for e-commerce.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And last, central distribution costs increased very slightly as percentage of sales due to deleverage.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Operating expenses for the quarter were $32.8&nbsp;million, or 32.4% of sales, as compared to $32.3&nbsp;million, or<BR>
33% of sales for the prior year quarter, a reduction of 60 basis points as a percentage of sales despite a<BR>
comp decline for the quarter.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">The operating expense ratio benefited from well-managed store payroll and a decrease in marketing expenses.<BR>
These benefits were offset partly by an increase in incentive pay accruals at both the store and the<BR>
corporate level.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Depreciation and amortization increased 66 basis points as a percentage of sales, reflecting the increase in<BR>
capital expenditures in recent fiscal years and the implementation of major technology upgrades during 2012.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Operating income for the first quarter was $2.8&nbsp;million, or 2.8% of sales as compared to $3.2&nbsp;million, or<BR>
3.2% of sales in the prior year quarter.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Income tax expense was $1.1&nbsp;million, 37.4% of pretax income, versus expense of $1.2&nbsp;million or 38.4% of<BR>
pretax income, which was recorded in the prior year quarter.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">The net income for the quarter was $1.8&nbsp;million, 10 cents per diluted share as compared to a net income of $2<BR>
million, or 10 cents per diluted share in the prior year.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Turning to the balance sheet and the cash flow statement. Inventories at May&nbsp;4, 2013, were $47.9&nbsp;million as<BR>
compared to $47.5&nbsp;million in the prior year. These numbers reflect an increase in total inventory of 1% and a<BR>
decrease of 5% on a per store basis.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Based on our experience from last year&#146;s Q2, we planned inventory levels down versus the prior year to place<BR>
greater emphasis on improving our merchandise margin.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">At the end of the quarter, we had $74.1&nbsp;million in cash on hand, compared to $67.8&nbsp;million at the end of<BR>
fiscal 2012 and $73.2&nbsp;million in the prior year period. The increase in cash came despite heavy capital<BR>
investment and the completion of our share repurchase program last year.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">No borrowings were outstanding under our revolving line of credit. Cash flows from operations were $8.6<BR>
million for the quarter, reflecting better inventory control and an increase in tenant allowance collections,<BR>
combined with positive operating performance.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Capital expenditures were $2.3&nbsp;million, down from $4.1&nbsp;million in the prior year quarter and reflective of<BR>
our planned reduction in capital expenditures for fiscal 2013.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">As we look ahead to the second quarter of fiscal 2013, we expect total sales to be in the range of $97<BR>
million to $98&nbsp;million, reflecting a nominal decrease to a nominal increase in comparable store sales<BR>
results, compared with sales of $91&nbsp;million and a comparable store sales decrease of 3.6% in the prior year<BR>
quarter.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">As we have discussed before, the shifts in the retail calendar for fiscal 2013 impact our quarterly comp<BR>
guidance. Each quarter during fiscal 2013 starts one week later than the same quarter of fiscal 2012, due to<BR>
the retail calendar for fiscal 2012 having 53&nbsp;weeks versus the typical 52&nbsp;weeks.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Inside the second quarter, this shift will provide a positive benefit of approximately 100 basis points,<BR>
which is contemplated in our comp guidance.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">As we entered the second quarter, sales trends had improved from where we began the year. However, traffic<BR>
continues to lag the prior year and remains the primary deterrent in achieving positive comps. Conversion in<BR>
average ticket have improved, but not yet enough to offset traffic decline.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Importantly, merchandise margin trends have also improved, enhancing our profitability during the first<BR>
quarter and are expected to gain on the prior year during the second quarter, despite continued headwinds<BR>
from inbound freight costs.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Operating expenses are expected to increase slightly as a percentage of sales, reflecting expenses associated<BR>
with our ongoing marketing test, which will impact Q2 a little more than originally forecast due to the shift<BR>
from Q1 I mentioned earlier.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We expect to report a loss of 8 to 11 cents per share for the quarter as compared to a loss of 11 cents in<BR>
the prior year. We plan on opening six stores and closing approximately five stores. Inventories at the end<BR>
of the second quarter are expected to be up slightly versus the prior year in total, due to higher store<BR>
count but flat on a per store basis.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We are planning to receive a portion of our fall and holiday seasonal products into our DC two to three weeks<BR>
earlier this year to better coordinate flow to stores for presentation purposes.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">For the full year fiscal 2013 as it relates to store count and store growth, we have revised our expectations<BR>
somewhat. We now expect to open approximately 25 new stores and close approximately 15 stores, implying unit<BR>
growth of 3% and square footage growth of 5%. The new store openings will be weighted toward the late second<BR>
quarter and third quarter, and the closings will be weighted toward the first half of the year.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Longer term, we are comfortable with and would expect an annual square footage growth target of 10%. However<BR>
as we indicated last quarter, we did not want an inordinate amount of store openings in the fourth quarter to<BR>
dilute the focus on the core business and the leveraging of the other capital investments we&#146;ve made to drive<BR>
results in that all-important quarter.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Our top line expectations are, for total sales in fiscal 2013, to increase by 3% to 5% over fiscal 2012. Due<BR>
to the shift in the retail calendar, this expectation for total sales growth reflects the comparison of 52<BR>
weeks to 53&nbsp;weeks. On a 52-week basis, this level of sales growth would imply comparable store sales of flat<BR>
to a slight increase for the full year.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">As far as our margin and expense assumptions for the full year, we expect out &#151; or inbound freight costs to<BR>
be higher on a year-over-year basis for the second quarter, but expect to benefit from lower inbound freight<BR>
costs in the back half due to new rates negotiated with our freight forwarders.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We continue to be optimistic about some of the specific initiatives in merchandising that are underway using<BR>
our new systems capabilities to better manage aspects of our merchandise assortment. We expect these efforts,<BR>
combined with better inventory control and less reactive promotional activity, to allow merchandise margins<BR>
to continue to improve as the year progresses.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Tight expense control throughout the company will serve to offset increased expenses in marketing and<BR>
e-commerce, as well as the impact of planned new hires in our Management Group.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">With a tax rate assumption of approximately 38.5% for the year, we would expect earnings per share to be in<BR>
the range of 75 cents to 85 cents for fiscal 2013.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">From a cash flow standpoint, we expect to generate positive cash flow in 2013, and we do not expect any usage<BR>
of our line of credit during the year. Capital expenditures are currently anticipated to range between $20<BR>
million and $23&nbsp;million in 2013 before landlord construction allowances for new stores.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">The mid-point of this range represents a reduction of 30% from fiscal 2012 due to fewer new store openings,<BR>
as well as reduced spending in information technology in existing stores. We currently estimate that<BR>
approximately $11 to $13&nbsp;million of the total capital expenditures will relate to new store construction, $4<BR>
million to $5&nbsp;million will relate to information technology, with the balance of our capital expenditures<BR>
relating to distribution center improvements and major store maintenance.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We will update our outlook each quarter during the year.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And thank you. I&#146;ll now turn the call over to Robert.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thanks, Mike, and good morning, everyone.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We were pleased to announce our solid first quarter results, exceeding our guidance for both comparable sales<BR>
and earnings. As with numerous retailers, we experienced a dismal start to the quarter in February when<BR>
retail sales and traffic nosedived, likely in response to federal income tax increases, added uncertainty for<BR>
the sequester concerns, and later-than-expected delivery of tax refund checks.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">By mid-March, we began to see some improvement in sales results, with similar trends experienced through<BR>
April.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Traffic and transactions were the key sales metrics that suffered disproportionately due to the more severe<BR>
early quarter consumer restrain. Our traffic results dropped 7% for the quarter versus the prior year period.<BR>
Strong conversion was slightly higher average ticket and an increase in items per transaction helped<BR>
alleviate the traffic effect. The traffic and transactions improved gradually over the course of the quarter.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Our merchandise margin for the quarter faced 100 basis points headwind due to higher inbound freight charges,<BR>
as Mike said. However by the end of the quarter, we were very pleased to see margin performance relatively<BR>
flat to last year, which speaks favorably of the improvements we&#146;re making in the merchandise mix and the<BR>
store experience.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Our decision to slightly decrease our inventory carry throughout the year was fortuitous in the first quarter<BR>
economic environment and also helpful to our store&#146;s ability to more ably present and sell the product.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Merchandise performance continues to show promise from technology upgrades as we work with our new Oracle<BR>
system capabilities and refine our blend of new and core product strategies, seeking a more robust but<BR>
consistent business.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Our team is currently adding Phase 2 planning and allocation modules to the base Oracle Retail Management<BR>
System. We remain very encouraged about the long-term potential of this element of our foundation technology<BR>
to be deployed in the third quarter to help us build discrete store inventories.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We&#146;re particularly pleased with our results in lamps, mirrors, ornamental wall decor, outdoor living, and<BR>
gifts and accessories during the quarter. Our team is regaining resonance for the customer in ornamental wall<BR>
decor and mirrors, part of the all-important mall category.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">The mirror category in particular has performed well for several quarters now, finding a nice and productive<BR>
balance between core programs and fashion offerings.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Our current repair and restoration efforts are most pronounced in furniture and decorative accessories. We<BR>
will have a slightly higher percentage improvement and reorder of both core products in our mix during the<BR>
first half, which has a significantly smaller amount of seasonal orientation than our fall assortment.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">While part of the second quarter results, we experienced on plan sales in the period, leading up to, even<BR>
during the very important week of Mother&#146;s Day, typically the biggest sales week of the first half. We also<BR>
enjoyed a positive response to our spring friends and family event. We&#146;re not even three weeks into the new<BR>
quarter. We have a lot of work ahead of us, but we&#146;re encouraged by our sales and margin progress.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Kirkland&#146;s continues to benefit from our fledging but growing a profitable e-commerce business. Our stated<BR>
goal is to continue to expand SKUs, sales, and service offerings and to fully integrate this channel with our<BR>
stores in order to enhance our business and customer relationships, as well as add new and loyal customers.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Web exclusive merchandise continues to be productive and total more than 35% of our online business.<BR>
Conversion, a focal point of our e-commerce team, showed positive results in the quarter.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We launched a white glove home delivery service for appropriate items during the first quarter, and we will<BR>
continue to make numerous technical and service-oriented improvements to the site throughout the balance of<BR>
the year.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">As we think about the outlook for the balance of the retail year, recent pockets of improvement in the<BR>
housing market suggest a lift to consumer confidence and activity, especially for middle income consumers<BR>
where housing has traditional been a reservoir of wealth similar to the equity and bond markets for the more<BR>
affluent.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Stronger job creation should follow and benefit from a more robust and consistently improving housing market<BR>
and would be very helpful to foster a more confident and active consumer group. However, we remain<BR>
conservative and concerned about the long-term effects of the current Fed and Administration economic policy<BR>
and actions.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thus, we are prudently cautious about near- and long-term economic trends, but more positive about Kirkland&#146;s<BR>
business positioning and prospects and ability to perform.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">As I said in my March remarks, we continue to expect improvement in merchandise performance over the balance<BR>
of the year, and that expectation has not changed. We expect marketing efforts to improve delivery of our<BR>
value and style message and expand our customer base throughout the year.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We&#146;re deep into multi-market &#151; multi-marketing media tests that will provide the best information we&#146;ve ever<BR>
had about how to most effectively deliver our value and style message to existing and prospective customers,<BR>
develop our brand, and enhance customer awareness.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Early results were positive on some components of the test. We&#146;re continuing to test to validate the results<BR>
before we implement a larger spend. We will have more to discuss on these important initiatives over the next<BR>
two quarters.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">As Mike said, we opened one new store in the quarter and project approximately six in the second, all of<BR>
which are currently under construction, and we&#146;ll open in the second quarter absent unusual developments.<BR>
That suggests a very busy third quarter.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">But given recent advice on several delayed space turnovers, we would expect approximately 25 new store<BR>
openings for the year. A smaller new store class than in previous years. The number of stores will again be<BR>
the function of right deal, right space, right market with no stretches. The current breakdown suggests fewer<BR>
relocations in the class. Maybe 20% or less.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">As I&#146;ve said before, we operate in a very crowded and confident sector with numerous larger retail chains<BR>
that have developed significant national brand awareness. We have accomplished a lot of critical and<BR>
necessary foundational work in our store base, balance sheet, operating technology, marketing, and<BR>
merchandising to meet the many challenges presented by the sector in the current economic environment. We&#146;re<BR>
getting better. I look forward to reporting our progress throughout the balance of the year, and thank you<BR>
for your time and interest.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Operator, we&#146;re prepared to entertain questions.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Operator:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thank you.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ladies and gentlemen if you&#146;d like to register for a question, please press the 1 followed by the 4 on your<BR>
telephone. You will hear a three-tone prompt to acknowledge your request.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">If your question has been answered and you would like to withdraw your registration, please press the 1<BR>
followed by the 3.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">If you are using a speakerphone, please lift your handset before entering your request.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">One moment please for our first question.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And our first question comes from the line of Brad Thomas from KeyBanc Capital Markets. Your line is open.<BR>
Please go ahead.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Bradley Thomas:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thanks. Good morning Robert. Good morning Mike.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Good morning.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Bradley Thomas:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I wanted to just first ask about the merchandise margin. You know obviously encouraging signs this quarter,<BR>
especially even in the context of a negative comp for the quarter.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">If we back out the freight aspect of things and just look at the product margins, how much of that<BR>
improvement was a result of maybe improving trends here through the quarter and more controlled inventory<BR>
levels? You know, how in control of that merchandise margin do you think you are going forward? You know,<BR>
what level of improvement do you think you can get, you know, if comps come in line with your guidance?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yes, Brad, the merchandise (unintelligible) &#151; that impact to the freight was 100 basis points. So when you do<BR>
back that out, I think you&#146;ll see about a 60 basis point improvement in what we would call a first cost type<BR>
margin.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And we would attribute it to a couple of things in the first quarter. One, as Robert mentioned and I think I<BR>
did in some of my remarks, the inventory levels were planned tighter and down a bit going into the year. And<BR>
I think that inherently made us a little more targeted and the mix was you know more current and went in with<BR>
a better, you know, markup and in a better position going in from that standpoint.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">The other thing that I think benefited us in the quarter was the controlled nature of our promotional<BR>
activity, particularly as we got deeper in the quarter. We are up against some time frames in the prior year<BR>
where we had to get a little reactive with a higher inventory level and a sales trend that was not meeting<BR>
expectation. And, I think that naturally kind of buoys your margin.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And going forward, on the freight side, it&#146;s looking more positive. We feel that the back half will start to<BR>
see benefits on the inbound freight side as we&#146;ve achieved some rate reductions through our freight<BR>
forwarders, and we compare those to what we saw last year. We predict that, that will result in a benefit for<BR>
us.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And we will continue to do the things we did in Q1 in terms of managing promotions, and then starting to<BR>
implement and use some of the new technology to drive margin going forward.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">So from all that, you know, we internally expect some improvement in our merchandise margin as the year wears<BR>
on here.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And I think we like our inventory position going into the second quarter better than the last couple or 3<BR>
years also.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Bradley Thomas:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">That&#146;s great.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Now it&#146;s certainly very, very encouraging to see here.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">With respect to the marketing expense, Mike, how much benefit did you see in terms of the timing shift and<BR>
how much should we factor in, you know, moving from 1Q to 2Q?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yes.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I would quantify that at about a half a million dollars. And really, that &#151; those dollars are accounted for<BR>
in Q2 and in the early part of the back half, so it&#146;s all factored into the overall guidance. There&#146;s just a<BR>
little shift about half a million dollars from Q1 into those other periods.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Bradley Thomas:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Great, great.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And then just one last question for me. Robert, I was curious if you had any update on the Board&#146;s plans for<BR>
the &#151; for succession? Certainly looks like you guys have a lot of opportunities in front of you this year.<BR>
But, you know, I know that there is a plan for you to leave here at some point.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yes. And I think you know it&#146;s just one of those things you have to wait until there&#146;s an announcement.<BR>
They&#146;re working and we&#146;re all working together and trying to make sure that we do the best job we can do, but<BR>
I don&#146;t think we have anything we can definitively say right now, Brad.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Bradley Thomas:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Okay. I appreciate it. Thanks guys and good luck going forward.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thanks.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Operator:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thank you.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Our next question comes from the line of Joan Storms from Wedbush. Your line is open. Please go ahead.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">Joan Bogucki-Storms:Hi. Good morning.</TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I have a question about the &#151; I think, Robert, you had talked briefly about adding the Phase 2 module to the<BR>
Oracle Merchandising System. What does that involve, and how does that improve from where the first phase<BR>
was?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Joan, the Phase 2, we&#146;re defining &#151; that&#146;s our term. We&#146;re defining it as the implementation of really five<BR>
clear you know modules into our already foundation Oracle system, which is first merchandise financial<BR>
planning, item planning, assortment planning, location planning and then allocation and replenishment.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">So there are really additional tools that work hand-in-hand with the foundation system that we already have<BR>
in place that will go live in phases throughout Q3.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And the benefits that we see there. Again, number one, efficiency. You&#146;re going to have after this, all<BR>
aspects of our merchandising systems will be tied together, which we&#146;ve never had before. And there are some<BR>
big efficiencies just in that.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">The item planning and the assortment planning tools I think really adds some functionality and provide us<BR>
with the visibility and a true buildup from bottoms-up into how we achieve our overall sales plan. We&#146;ve had<BR>
tools we&#146;ve used in the past, but you know you&#146;re looking at some more robust things that we can do in the<BR>
system to really see by SKU even how that all builds up to our overall plan.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">The location planning tool will certainly help us manage the inventory mix and the assortment in specific<BR>
stores. And we&#146;ll just have a better handle on the lifecycle of our SKUs by using all these tools, and that<BR>
will lead to better turns, lower markdown rates &#151; you know, higher margins in the long run.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And on the allocation and replenishment side, we&#146;ll be able to do pre-allocations of a lot of our SKUs as we<BR>
make orders, and replenishment will be much more automated than it is today.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">So a lot of work. And it will take some time to absorb all this, but it&#146;s very important that we make headway<BR>
in getting it in this year to go along with what we&#146;ve already got in the implementation last October.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I think the key words there are &#151; you know, I think I used building discrete inventories for the stores. The<BR>
more that you can properly size and designate the right inventory for a particular store, obviously, the<BR>
better the performance is going to be. And we&#146;re going to continue to press toward that individualization of<BR>
inventories for stores, and that&#146;s not going to happen immediately.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">But as Mike said, with time, we believe we&#146;ll get closer and closer to maximizing that opportunity.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">Joan Bogucki-Storms:Okay, that&#146;s great.</TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And then how is your search going for adding additional buyers in the merchant through the merchandising team?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Again, Joan, I think when we have a result, we&#146;ll announce it. You know as with everything involving<BR>
personnel, we continue to take a look and work on what we think makes sense for the company and is accretive<BR>
to ability and eventual results.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">Joan Bogucki-Storms:Okay.</TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And then some of the better performing categories that you talked about had been ones that had been &#151; you<BR>
know seems like we&#146;re improving versus some of the negatives. So is that sort of functional from a standpoint<BR>
of you know having a more manageable inventory levels as well as the integration of the initial merchandising<BR>
system?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I think better information leads to the ability to more quickly repair category performance.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I think one of the most important things has been the very well coordinated and good job that our merchant<BR>
and planning teams have done in identifying particular SKUs and the level of SKUs that go into our core<BR>
strategy. Things that need to be part of our mix, day in and day out for extended periods of time. We&#146;ve had<BR>
a great performance with that sort of in the first quarter as that strategy has been more fully implemented.<BR>
And, we expect to help with that going forward.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We&#146;ve had outsized results to the level of inventory for that group. So that&#146;s &#151; I think that&#146;s an important<BR>
part of it. But generally, I think what we&#146;re seeing happen, for example, and in the wall, is that it&#146;s not<BR>
just about art. It&#146;s about ornamental wall d&#233;cor. It&#146;s about mirrors. And we certainly have over the last 2<BR>
years made improvements in putting our mirrors in a better position, and the same thing with ornamental wall<BR>
decor.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We&#146;ve done a much better job, I think, of cutting down SKUs and presenting our offering in the store. So it&#146;s<BR>
been both a merchandising effort and an in-store effort to make that happen.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yes. I think the in-store piece is important, too. I mean, we&#146;ve done a lot of work and are trying hard to<BR>
improve how we visually display the product through our work last year and you know fixture enhancements, and<BR>
you know I think we&#146;re starting to see some of that work in our favor as well. So that&#146;s an important part of<BR>
it.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">Joan Bogucki-Storms:Okay.</TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And then one last question and I&#146;ll let someone else go.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">On the traffic comp, which was down 7% &#151; I mean I think you were saying at the beginning of the quarter was<BR>
pretty tough, but you saw improvements. So was that traffic trend sort of improving as you got through the<BR>
quarter?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yes, it was definitely softer in February.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Another point I would make on the traffic is, there is a calendar shift. It&#146;s a small one, but it accounts<BR>
for about a point of that because of the way the weeks fall. But yes, it improved and it was also impacted by<BR>
the calendar a little bit.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">Joan Bogucki-Storms:Thanks a lot.</TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thank you.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Operator:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thank you.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Our next question comes from the line of David Magee from SunTrust Robinson Humphrey. Your line is open.<BR>
Please go ahead.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Lynda Guthmann:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Hi. Yes, this is Lynda Guthmann in for David.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">First, if we can just talk a little bit more about the e-commerce business. What &#151; you mentioned some<BR>
initiatives that you guys are working on here. If you&#146;re able to expand upon this, are you guys are looking<BR>
at anything such as shipping from the store or store pickup?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We do a lot of in-store pickup right now. In fact, it&#146;s about 45% of our business, so we have a pretty<BR>
healthy in-store pickup capability. We are looking at improving that down the road to be more real-time.<BR>
Right now, we actually facilitate the order out of our DC, and it arrives free on our truck to avoid<BR>
shipping. But that involves the customer have to wait a little bit longer than we would like them to.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And so that&#146;s a future enhancement that we&#146;re going to add to be able to pull more dynamically from the<BR>
inventory. So that&#146;s &#151; so the in-store pickup is a big part of the business.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Robert mentioned white glove was a capability we added in Q1. We&#146;ve done some things with the checkout<BR>
process, the checkout funnel, to make that easier for customers. We now take our private label credit card<BR>
online, which is a big win for us. That is something that we added during the quarter.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And we&#146;re just, you know, behind the scenes doing things to improve the site and the SEO capabilities where -<BR>
you know, the way we tag words and keywords on the site.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">As we look forward, there&#146;s a lot more we want to do, and it does involve the things you mentioned, which is<BR>
really becoming more in sync with stores, dynamically shipping and sending products to customers, giving them<BR>
more chances as to how they want it. And those are all things that we have in our roadmap. Some of which will<BR>
come of this year, but some, you know, in the future periods.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Lynda Guthmann:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And the next question. And this might be too early to tell, but are you seeing any cannibalization from the<BR>
online business affecting the stores?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">There&#146;s certainly a strong overlap between where the orders come from and where our stores are located. So I<BR>
guess, you know, we don&#146;t see a big effect there. A lot of the goods are being shipped to the stores. I<BR>
mentioned you got 45% of them actually triggering a follow-up store visit. So what we&#146;re trying to do is<BR>
maximize our chances of converting customers in both &#151; on both the Web and in the store.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We allow returns to the store. That&#146;s another store visit. So we think cannibalization is pretty small.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And especially if you consider it in terms of the percentage that e-commerce sales are to the total sales, it<BR>
suggests that it&#146;s somewhat minimal now.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Lynda Guthmann:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Okay, great.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And then last question for next quarter. Assuming that second quarter comps are flatter, what is driving the<BR>
sequential improvement? Would it be more conversions or &#151; since traffic has been kind of down.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Well, we have you know plans for the back half. And if you look at the numbers and the buys that we&#146;re<BR>
making, we feel that some of these benefits that we see out of the technology improvements and out of some of<BR>
our internal process that we&#146;ve been working on for the last six to nine months and in &#151; and currently, we&#146;ll<BR>
continue to build and start to pay off.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We think it&#146;s gradual, and our plan is by fourth quarter you know hopefully, we&#146;re at a little bit higher<BR>
level. We aren&#146;t calling for &#151; you know, we&#146;re calling for a flat to a slight increase in comps, so it&#146;s not<BR>
a dramatic move from where we&#146;re operating right now.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Lynda Guthmann:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Okay, great. Thank you.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thank you, Lynda.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Operator:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thank you.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Our next question comes from the line of Alex Fuhrman from Piper Jaffray. Your line is open. Please go ahead.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Alex Fuhrman:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Great. Thanks a lot.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">You know, I&#146;d love to talk just a little bit quickly about the increase in conversion in the quarter. You<BR>
know as you saw traffic pick up sequentially throughout the quarter, did you see a similar inflection upward<BR>
in conversion, or was that a little bit more constant throughout the year?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And you know to what extent is that &#151; do you feel driven by the &#151; you know, just a better merchandise<BR>
assortment, given that your inventories have been a little bit more in control?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And then kind of looking out to the balance of the year is there a whole lot that you can do to affect<BR>
traffic levels? Whether it&#146;s with your marketing, or promotions, or in-store window displays, things like<BR>
that, or is it really just a function of the real estate at this point?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">All right. The piece about inventory, you might have to repeat, but I&#146;ll start with the other.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">The trends on traffic, you know, as they did improve we didn&#146;t &#151; we also saw improvement in conversion. I<BR>
would say the conversion trend was more consistent across the quarter than the traffic trend. So as we<BR>
finished up the quarter, conversion was maybe even a little better than when we started.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">So that&#146;s encouraging from that standpoint with it &#151; you know sometimes traffic conversions can work in<BR>
opposite directions because the more people that walk in, the harder they are to convert. But we didn&#146;t see<BR>
that as much, that relationship, as we worked in April.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">As far as going forward in the year, how do we affect traffic? You know ultimately, it&#146;s about having the<BR>
right product and promotions and things to drive people to the store. We are in the midst of this marketing<BR>
test, which is really important. But it only affects seven markets currently.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">But what we can do as the year progresses and we see what works in this test and we start to apply it to a<BR>
broader group stores. And that&#146;s a big initiative for us right now.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Alex Fuhrman:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thanks for your answer, and good luck with the quarter.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thank you.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Operator:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thank you.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">As a final reminder ladies and gentlemen, to register for a question please press the 1 followed by the 4.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Our next question comes from the line of Anthony Lebiedzinski from Sidoti &#038; Co. Please go ahead.</DIV></TD>
</TR>
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</DIV>


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

<TR valign="top" style="font-size: 12pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Anthony Lebiedzinski: Good morning.</TD>
</TR>

</TABLE>



<P align="left" style="margin-left:10%; font-size: 12pt">I was just wondering how long do you plan to run the marketing test? You know at
this point, what are your current thoughts?

<DIV align="center">
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    <TD width="52%">&nbsp;</TD>
</TR>

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<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">Michael Madden:Well, we&#146;re running it from March to July in seven markets, and<BR></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">it&#146;s a combination of cable, solo, free-standing inserts in the newspaper, and<BR></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">shared free-standing inserts in the newspaper, and direct mail as well.<BR></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">And we are &#151; you know the plan would be to assess the test and really think<BR></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">about how to scale it across a larger number of markets in the back half<BR></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">potentially, in addition to keeping in the current markets in the test. That&#146;s<BR></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">probably our decision point this year as we get deeper into the test. It&#146;s<BR></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">still early.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><BR></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">As we go forward more longer term, you know ultimately, it&#146;s you know how do we<BR></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">scale this activity system-wide and when do we do it? But inside fiscal 2013,<BR></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">it&#146;s about a kind of moving beyond the test should we see success. And early<BR></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">on, it&#146;s looking like its effective. We&#146;re seeing positive results. It&#146;s still<BR></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">early, and we want to read the rest of it. Yes.<BR></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">((Crosstalk))
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><BR></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Michael Madden:Yes.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><BR></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Anthony Lebiedzinski:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Okay. So I&#146;m sure you&#146;ll have more to<BR>
say on your next conference call in<BR>
August about it, right?</TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Michael Madden:Yes.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><BR></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Robert Alderson:We will.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><BR></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Anthony Lebiedzinski:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Okay.</TD>
</TR>
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</TABLE>
</DIV>



<P align="left" style="margin-left:10%; font-size: 12pt">Now I was wondering if there was any significant weather impact in your
quarterly sales performance, or anything you can perhaps call out?

<DIV align="center">
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    <TD width="32%">&nbsp;</TD>
</TR>

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<TR valign="bottom" style="font-size: 12pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Michael Madden:Not really.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><BR></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">Robert Alderson:I don&#146;t think we saw any &#151; we&#146;re pretty<BR></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">conservative about talking about weather. We have to have<BR></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">a sort of a major regional sort of event that causes us a<BR></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">lot of store closings over a protracted period of time<BR></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">before we call out weather. We don&#146;t typically &#151; we&#146;re not<BR></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">typically affected by for example, a slightly later or<BR></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">slightly earlier spring. I think, sometimes, we are, but<BR></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">not to the extent maybe that apparel retailers are.<BR></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Anthony Lebiedzinski:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Got you. Got you.</TD>
</TR>
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</TABLE>
</DIV>



<P align="left" style="margin-left:10%; font-size: 12pt">And in terms of just overall, your outlook for expenses as you trim your store
openings. I mean can you talk about the different puts and takes that we should
think about for operating expenses throughout the rest of the year?

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    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yes.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I mean, the biggest one that I think could move one<BR>
way or the other would be marketing, depending on<BR>
how you know we see things progress over the next<BR>
few months. So that&#146;s one that you know we will<BR>
evaluate before we go a little deeper with it.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Beyond that, we have been I would say pretty<BR>
conservative in terms of expenses and increases in<BR>
expenses as we plan this year. I mean, store payroll<BR>
has &#151; as I mentioned earlier, we had good control<BR>
and we leveraged that even with the negative comp in<BR>
the first quarter, which was you know a good sign.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And we&#146;re &#151; you know, we&#146;re really looking across<BR>
the organization to make sure that we are investing<BR>
with expense increases more than just layering in<BR>
other things. So I feel like, you know, we&#146;ve done<BR>
some work there that will allow us to hold those<BR>
down as the year progresses. And the store count is<BR>
a factor in that with fewer openings. That certainly<BR>
plays into it as well.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">Anthony Lebiedzinski:Okay. Thank you very much.</TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thank you.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Operator:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thank you.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And our final question comes from the line of Matt<BR>
Dhane from Tieton Capital. Your line is open. Please<BR>
go ahead.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Matthew Dhane:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thank you.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I was curious, with the positive margin impact due<BR>
to holding inventories down in Q1, would you expect<BR>
average inventory per store to remain down at<BR>
similar levels in Q2 and I guess for the rest of the<BR>
year? I know you talked about inventories being up<BR>
in Q2, but obviously your store base is growing in<BR>
results. Can you help me understand the &#151; I guess<BR>
the carry-forward of that strategy going forward?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We would expect inventories to be down in a similar<BR>
fashion I think through the balance of the year.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">The only caveat to going into Q3 that I would<BR>
mention is we did and have made a decision to flow<BR>
the seasonal product a little sooner. Ultimately,<BR>
that settles out. But in terms of going into Q3, we<BR>
did that for planning presentation purposes to allow<BR>
a better flow to stores this year that we felt like<BR>
we&#146;ve got an opportunity from last year&#146;s<BR>
experience.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And I think at the end of the year, you may see a<BR>
similar early receipt of goods that would be<BR>
affected by Chinese New Year, which would be a<BR>
January phenomena that would affect March and April<BR>
sales most dramatically. So you may see us adjust a<BR>
bit there.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">But overall, the idea is that slightly lower<BR>
inventories than we&#146;ve had in the prior couple of<BR>
years should be helpful to sales and the margin.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Matthew Dhane:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And from your perspective, is there any advantage to<BR>
even trying to pull them down even lower and seeing<BR>
if that has the further benefit on margins<BR>
(unintelligible)?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I think we will be evaluating that. I mean, I think<BR>
our inclination is to fight the urge to try to drive<BR>
sales with more. And I think the idea is that you<BR>
drive better sales with better inventory, and I<BR>
think that&#146;s what all the technology and the process<BR>
change and efforts that we&#146;re making throughout the<BR>
organization are to be even more productive with a<BR>
smaller level of inventory, and therefore, use our<BR>
resources more effectively.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Matthew Dhane:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Great. Thank you both.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thank you.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Operator:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We have no further questions at this time. Mr.<BR>
Alderson, I&#146;ll turn the call back over to you.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Well, thank you very much, everyone. We appreciate<BR>
your interest today, and we look forward to speaking<BR>
with you in a few months.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thanks. Bye.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Operator:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ladies and gentlemen, that does conclude the<BR>
conference call for today. We thank you for your<BR>
participation, and ask that you please disconnect<BR>
your lines.</DIV></TD>
</TR>
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`
end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
