Description of Business and Basis of Presentation Kirklands, Inc. (the Company) is a specialty retailer of home decor in the United States operating 432 stores in 37 states as of November 2, 2019 , as well as an e-commerce enabled website, www.kirklands.com. The condensed consolidated financial statements of the Company include the accounts of Kirklands, Inc. and its wholly-owned subsidiaries, Kirklands Stores, Inc., Kirklands DC, Inc., and Kirklands Texas, LLC. Significant intercompany accounts and transactions have been eliminated. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and are presented in accordance with the requirements of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required for complete financial statements. In the opinion of management, all adjustments, including normal recurring accruals, considered necessary for a fair presentation have been included. These financial statements should be read in conjunction with the audited financial statements included in the Companys Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 29, 2019 . It should be understood that accounting measurements at interim dates inherently involve greater reliance on estimates than those at fiscal year-end. In addition, because of seasonality factors, the results of the Companys operations for the 13-week and 39-week periods ended November 2, 2019 are not indicative of the results to be expected for any other interim period or for the entire fiscal year. The Companys fiscal year ends on the Saturday closest to January 31, resulting in years of either 52 or 53 weeks. The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from the estimates and assumptions used. Changes in estimates are recognized in the period when new information becomes available to management. Areas where the nature of the estimate makes it reasonably possible that actual results could materially differ from amounts estimated include, but are not limited to, impairment assessments on long-lived assets, inventory reserves and self-insurance reserves. For the 13-week and 39-week periods ended November 3, 2018, the Company recorded an unfavorable $0.7 million one-time out-of-period adjustment related to revised straight-line rent calculations to cost of sales from deferred rent. In the beginning of fiscal 2019, the Company adopted new lease accounting guidance. The adoption of the new lease accounting guidance had a material impact to the Companys condensed consolidated balance sheets and related disclosures, and resulted in the recording of additional right-of-use assets and lease liabilities of approximately $295.2 million as of the date of adoption. This guidance was applied using the optional transition method, which allowed the Company to not recast comparative financial information but rather recognize a cumulative-effect adjustment to retained earnings as of the effective date in the period of adoption. An adjustment of $0.3 million was made to retained earnings as a result of right-of-use assets that were impaired upon the adoption of this guidance. See Note 11 to the condensed consolidated financial statements for further discussion. Consistent with the optional transition method, the financial information in the condensed consolidated balance sheets prior to the adoption of this new lease accounting guidance has not been adjusted and is therefore not comparable to the current period presented. The standard did not materially impact the Companys condensed consolidated statements of operations or cash flows. For additional information, including the required disclosures, related to the impact of adopting this standard, see Note 10 and Note 12 to the condensed consolidated financial statements. Certain other amounts in the fiscal 2018 operating activities section of the condensed consolidated statement of cash flows have been reclassified to conform to the fiscal 2019 presentation. These reclassifications had no effect on reported net loss. The Company uses the redemption recognition method to account for breakage for unused gift card amounts where breakage is recognized as gift cards are redeemed for the purchase of goods based upon a historical breakage rate. In these circumstances, to the extent the Company determines there is no requirement for remitting card balances to government agencies under unclaimed property laws, such amounts are recognized in the consolidated statements of operations as a component of net sales. The table below sets forth selected gift card liability information (in thousands) for the periods indicated: November 2, 2019 February 2, 2019 November 3, 2018 Gift card liability, net of estimated breakage $ 11,187 $ 13,032 $ 10,308 The table below sets forth selected gift card breakage and redemption information (in thousands) for the periods indicated: 13-Week Period Ended 39-Week Period Ended November 2, 2019 November 3, 2018 November 2, 2019 November 3, 2018 Gift card breakage revenue $ 243 $ 257 $ 774 $ 809 Gift card redemptions recognized in the current period related to amounts included in the gift card contract liability balance as of the prior period 1,814 2,110 5,349 5,012