2Q09 Revenues Increased 100.8% to $51.5 Million
2Q09 Gross Profit Increased 66.2% to $9.9 Million
2Q09 Net Income Increased 76.6% to $2.3 Million
Company Opened Three New Supermarkets in 2Q09
DAQING, China, Aug. 15 /PRNewswire-Asia/ -- QKL Stores Inc. (the "Company") (OTC Bulletin Board: QKLS), a leading regional supermarket chain in Northeast China, today announced its financial results for the second quarter ended June 30, 2009.
Second Quarter 2009 Financial Results
Second quarter revenue increased 100.8% to $51.5 million compared to $25.7 million in the second quarter of 2008. Retail sales revenue, which consists of revenue derived from 31 supermarkets and two department stores, represented $50.4 million, or 97.8% of the quarter's total revenue, compared to $24.9 million, or 96.9% of revenue, in the prior year period. The retail revenue was primarily driven by 13 new stores opened since April 2008 as well as the steady growth of the 20 retail stores that have been open for more than one year.
Sales from the 20 stores open at least one year increased 23.0% to $28.7 million from $23.3 million in the second quarter of 2008. Other income, which primarily includes revenue from the Company's two department stores and from tenants within its supermarket retail locations, grew to $1.1 million in the second quarter of 2009, up from $0.8 million in the prior year's period.
In the second quarter of 2009, gross profit increased 66.2% to $9.9 million from $6.0 million in the second quarter of 2008. Gross margin decreased to 19.2% from 23.2% in the prior year's period. Second quarter gross margin results were in line with the Company's expectations which assumes that gross margin will be in the range of 17%-19% over the next few quarters as additional new stores, which tend to be less profitable, contribute to the financial performance.
Mr. Zhuangyi Wang, Chairman and CEO, said, "We are pleased to report our financial results for the second quarter of 2009. Our retail stores continue to drive our topline performance, which grew more than 100% year over year. Looking forward, we expect the new stores to help bolster our sales and overall visibility while the existing stores demonstrate steady and consistent growth. While we remain focused on enhancing overall efficiency and profits, our commitment to execute on our store expansion plan is expected to slightly impact our gross margin. We believe our strategy of providing our customers with a broad variety of products coupled with competitive prices will drive customer loyalty and effectively enable us to expand our geographic presence and further bolster our dominant store position in the Northeast provinces."
Operating income in the second quarter of 2009 increased 66.1% to $2.9 million from $1.8 million in the prior year period.
Selling expense increased to $6.3 million, or 12.2% of sales, compared to $3.4 million, or 13.2% of sales, in the prior year period. This increase was due primarily to marketing expenses related to promotional and marketing events during the quarter designed to increase customer loyalty and drive pedestrian traffic to its stores. General and administrative expenses in the second quarter of 2009 decreased 13.1%to $0.7 million from $0.8 million in the prior year's period.
Net income in the second quarter of 2009 increased 78.7% to $2.3 million, or $0.08 per diluted share, from $1.3 million, or $0.04 per diluted share, in the prior comparable period.
Balance Sheet and Cash Flow
As of June 30, 2009, the Company had $21.3 million of cash, compared to $22.6 million as of March 31, 2009 and $19.3 million as of December 31, 2008. The Company had no bank loans as of June 30, 2009.
Net cash flow from operating activities was $7.1 million in the second quarter of 2009 compared to $6.4 million in the second quarter of 2008. Net cash flow used by investing activities was $3.0 million in the first half of 2009 compared to $1.1 million used in the first half of 2008. Net cash flow used by financing activities was $2.2 million in the first half of 2009 compared to $12.7 million provided in the first half of 2008.
Retail Store Update
During the second quarter, the Company opened new supermarkets in Lindian county, Daqing's Xinguangtiandi commercial shopping center, and Zhaodong City, respectively, bringing to 31 the number of total supermarkets opened as of today.
The Company has supermarket locations and one department store totaling 67,000 sq. meters under construction, all of which are scheduled to open by the end of 2009 or at the beginning of 2010. Additionally, in order to support its retail expansion efforts, the Company plans to open a 19,600 sq. meter distribution center in Harbin, the capital city of Heilongjiang Province. Management believes that this new facility, which is expected to be operational in the fourth quarter of 2009, is sufficient to support its current stores in the region as well as future stores the Company plans on opening over the next few years.
Mr. Zhuangyi Wang, Chairman and Chief Executive Officer of QKL Stores, said, "During these challenging economic times, we remain focused on providing our customers with diversified products of great value and competitive pricing. We have built a strong brand in the northeast provinces and we will continue to leverage our trusted brand to more small and medium sized cities in northeastern China without modern supermarkets chains.
Mr. Wang continued, "For the remainder of the year, we are committed to expanding our store base and opening a distribution center in Harbin that can provide better support to our existing stores as well as planned expansion in the coming years. As previously announced, we recently launched a new initiative with existing as well as prospective suppliers to further strengthen our relationships and deepen our supply chain. Through these efforts, we continue to add new national and regional suppliers to our network.
Mr. Wang continued, "Our healthy balance sheet and cash flow generated from operations have enabled us to capitalize on our market opportunity and execute an aggressive growth plan for this year. We look forward to continued momentum in the second half of the year and believe we have the right team in place to further enhance our leadership position in northeast China."
Conference Call
The Company will conduct a conference call to discuss its second quarter 2009 results on Monday, August 17th at 9:00am ET. Listeners may access the call by dialing +1-913-312-0658. To listen to the live webcast of the event, please go to http://www.viavid.net . Listeners may access the call replay, which will be available through August 31st, by dialing +1-719-457-0820; passcode: 1319054.
About QKL Stores Inc.:
Based in Daqing, China, QKL Stores Inc. is a leading regional supermarket chain company operating in Northeast China. The Company sells a broad selection of merchandise, including groceries, fresh food, and non-food items, through its retail supermarkets, hypermarket stores, and department stores; the company also has its own distribution centers that service its supermarkets.
Safe Harbor Statement
Certain statements in this release and other written or oral statements made by or on behalf of the Company are "forward-looking statements" within the meaning of the federal securities laws. Statements regarding future events and developments and our future performance, as well as management's expectations, beliefs, plans, estimates or projections relating to the future, are forward-looking statements within the meaning of these laws. The forward looking statements are subject to a number of risks and uncertainties including market acceptance of the Company's services and projects and the Company's continued access to capital and other risks and uncertainties. The actual results the Company achieves may differ materially from those contemplated by any forward-looking statements due to such risks and uncertainties. These statements are based on our current expectations and speak only as of the date of such statements.
QKL STORES INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 2009 AND 2008
(Stated in US Dollars)(Unaudited)
Three months ended June 30,
2009 2008
Net revenues
Direct sales $ 50,397,527 $ 24,882,810
Other operating income 1,140,169 788,946
$ 51,537,696 $ 25,671,756
Cost of inventories sold (41,645,062) (19,718,746)
Gross profit $ 9,892,634 $ 5,953,010
Selling expenses (6,266,436) (3,393,810)
General and administrative expenses (685,644) (788,742)
Income from operation $ 2,940,554 $ 1,770,458
Interest income 89,447 83,346
Interest expenses -- (55,643)
Income before income taxes $ 3,030,001 $ 1,798,161
Income taxes (687,178) (486,772)
Net income $ 2,342,823 $ 1,311,389
Basic earnings per share $ 0.11 $ 0.06
Diluted earnings per share $ 0.08 $ 0.04
Basic weighted average share
outstanding 20,882,353 20,882,353
Diluted weighted average share
outstanding 30,000,000 31,127,457
CONSOLIDATED BALANCE SHEETS
AS AT JUNE 30, 2009 AND DECEMBER 31, 2008
(Stated in US Dollars)
June 30, 2009 December 31, 2008
ASSETS (Unaudited) (Audited)
Current assets
Cash and cash equivalents $ 21,276,845 $ 19,285,021
Pledged deposits 202,472 293,149
Trade receivables -- 793,352
Other receivables 4,827,181 4,189,140
Prepaid expenses 1,861,573 1,862,591
Advances to suppliers 2,816,971 3,342,756
Inventories and consumables 13,376,199 14,544,341
Total current assets $ 44,361,241 $ 44,310,350
Property, plant and
equipment, net 14,917,975 12,960,303
Intangible assets, net 763,757 776,259
Goodwill 19,202,765 18,878,823
Long term prepayment 768,856 787,741
TOTAL ASSETS $ 80,014,594 $ 77,713,476
LIABILITIES AND -STOCKHOLDERS'
EQUITY
Current liabilities
Short-term bank loans $ -- $ 2,188,439
Accounts payable 20,777,611 21,283,818
Cash card and coupon liabilities 4,340,299 3,858,514
Deposits received 1,271,012 2,901,205
Accruals 742,716 681,969
Other PRC taxes payable 391,826 203,443
Other payables 1,569,734 1,476,665
Income taxes payable 680,503 1,252,336
Total current liabilities $ 29,773,701 $ 33,846,389
TOTAL LIABILITIES $ 29,773,701 $ 33,846,389
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008
(Stated in US Dollars)(Unaudited)
Six months ended June 30,
2009 2008
Cash flows from operating activities
Net income $ 6,017,999 $ 2,415,296
Depreciation 1,163,183 872,058
Amortization 13,571 15,874
Loss on disposal of plant and -- 184,684
equipment
Adjustments to reconcile net income
to net cash provided by operating
activities:
Other receivables 162,191 (413,108)
Inventories and consumables 1,188,388 837,907
Advances to suppliers 530,497 24,633
Prepaid expenses 23,547 (749,020)
Accounts payable (535,559) 3,191,214
Cash card and coupon liabilities 476,596 201,683
Deposits received (1,634,551) (852,263)
Accruals 59,918 344,202
Other PRC taxes payable 188,147 296,759
Other payables 71,097 (13,089)
Income taxes payable (573,684) 91,984
Net cash provided by operating
activities $ 7,151,340 $ 6,448,814
Cash flows from investing activities
Purchase of plant and equipment $ (3,124,662) $ (822,573)
Sales proceed of fixed assets 21,160 --
Payment of long term prepayments -- (12,712)
Decrease in pledged deposits 90,677 --
Increase in pledged deposits -- (300,000)
Net cash used in investing
Activities $ (3,012,825) $ (1,135,285)
QKL STORES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008
(Stated in US Dollars)(Unaudited)
Six months ended June 30,
2009 2008
Cash flows from financing activities
Issuance of Series A convertible
preferred stock $ -- $ 15,500,000
Bank loan repayments (2,191,947) (2,827,802)
Net cash (used in)/provided by
financing activities $ (2,191,947) $ 12,672,198
Net cash and cash equivalents
sourced $ 1,946,568 $ 17,985,727
Effect of foreign currency
translation on cash and cash
equivalents 45,256 1,180,212
Cash and cash equivalents -
beginning of year 19,285,021 10,742,064
Cash and cash equivalents -
end of year $ 21,276,845 $ 29,908,003
For further information, please contact:
Company Contact
QKL Stores Inc.
Diana Zhang & Crystal Chen
Tel: +86-459-460-7626
Web: http://www.qklstoresinc.com
Investor Relations:
ICR, Inc.
Wei Jung Yang
Tel: +86-10-6599-7968
Bill Zima
Tel: 1-203-682-8200
