-- 2Q'10 Revenue Increased 29.5% to $66.1 Million
-- Quarterly Same Store Sales Increased 13.9%
-- 2Q'10 Gross Profit Increased 27.8% to $11.6 Million
-- Company Reiterates Comfort with 2010 Store Opening Plan
DAQING, China, Aug. 17 /PRNewswire-Asia/ -- QKL Stores Inc. (the "Company") (Nasdaq: QKLS), a leading regional supermarket chain in Northeastern China, today announced its financial results for the quarter ended June 30, 2010.
Mr. Zhuangyi Wang, Chairman and CEO, said, "Our sales performance in the second quarter continued our long term trend of strong quarterly same store sales growth. Our execution related to these items is improving rapidly and will position us for greater top and bottom line growth ahead. Operating expenses were generally in line with where we expected them to be given our store expansion efforts in the coming months. The opening of our new 19,600 sq. meter distribution center in the second quarter should result in future gross margin growth by facilitating our expansion of direct grocery and non-food purchases from manufacturers, the growth of our private label business and larger purchases of a wider variety of fruits and vegetables from local farmers."
Second Quarter 2010 Financial Results
Revenue in the second quarter of 2010 increased 29.5% to $66.1 million from $51.0 million in the second quarter of 2009. Revenue performance reflected the growth of 31 comparable stores, which are stores that have been open for at least one year, as well as sales from the opening of 6 new stores since January 1, 2009. Same-store sales were approximately $58.1 million in the second quarter of 2010, an increase of 13.9% from $51.0 million in the second quarter of 2009.
Gross profit increased 27.8% year over year to $11.6 million, or 17.5% of net sales, from $9.1 million, or 17.8% of net sales, in the prior year period. The change in gross profit was primarily attributable to the year over year increase in net sales.
SG&A expenses increased 44.3% to $8.8 million compared to $6.1 million in the prior year period. This was primarily a result of higher compensation costs, rent expenses, hiring of more employees, and other operating costs related to the Company's increased store count over the past year. Operating income decreased 2.7% to $2.7 million from $2.9 million in the second quarter of 2009.
Net income for the second quarter of 2010 increased to $2.1 million, or $0.05 per diluted share, from a net loss of ($11.5 million), or -$0.55 per diluted share in the second quarter of 2009. Excluding changes in the fair value of warrants for the 2009 second quarter period, adjusted net income for the second quarter of 2010 decreased 9.8 % to $2.1 million, or $0.05 per diluted share, from $2.3 million, or $0.11 per diluted share, in the prior year period. The number of shares used in the computation of diluted EPS increased 32.9% to 39.9 million shares from 30.9 million shares.
As of June 30, 2010, the Company had $59.4 million in unrestricted cash, compared to $46.5 million as of March 31, 2010, and no debt or bank loans.
Retail Store Update
As of June 30, 2010, we operated 37 stores totaling 165,000 sq. meters. The Company remodeled two existing stores and closed one store in the second quarter of 2010.
Mr. Wang continued, "We remain comfortable with our goal of opening 20 new stores in 2010. We are working diligently on our expansion plan, and are satisfied with our current progress. Most of the stores under our store opening plan will be completed by the fourth quarter of this year. It typically takes 13 weeks to open a new store. This includes two weeks of designing, 8 weeks to construct the store and three weeks to stock it. By year end, we expect to have a total of 55 stores occupying an aggregate of 260,000 sq. meters. The majority of the new stores expected to open in the second half of this year are hypermarkets. As these new stores come online in the second half of the year, particularly in the fourth quarter, we expect to see significant revenue increases as compared to the prior year period. We remain highly optimistic about the long-term growth, sustainability and profitability of our business and believe QKL Stores has quickly established itself as a leading supermarket retail chain in the northeast China region."
Conference Call
The Company will conduct a conference call to discuss its second quarter 2010 results on Tuesday, August 17, 2010 at 8:30 am ET. Listeners may access the call by dialing #1-719-325-2499. 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; conference ID: 6420253.
About QKL Stores Inc.:
Based in Daqing, China, QKL Stores Inc. is a leading regional supermarket chain company operating in Northeastern China. QKL Stores sells a broad selection of merchandise, including groceries, fresh food, and non-food items, through its retail supermarkets, hypermarkets and department stores; the company also has its own distribution centers that service its supermarkets. For more information, please access the Company's website at: http://www.qklstoresinc.com .
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.
For further information, please contact:
QKL Stores Inc.
In U.S.:
Crystal L. Chen, CFO
Tel: +1-909-895-6516
In China:
Mike Li, Investor Relations
Tel: +86-459-460-7987
ICR, Inc.
In U.S.:
Bill Zima
Tel: +1-203-682-8200
In China:
Yuening Jiang
Tel: +86-10-6599-7965
QKL STORES INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited) (Unaudited)
Six Months Ended June 30, Three Months Ended June 30,
2010 2009 2010 2009
Net sales $147,705,707 $117,842,219 $66,099,594 $51,037,146
Cost of sales 121,584,917 97,002,702 54,504,918 41,967,140
Gross profit 26,120,790 20,839,517 11,594,676 9,070,006
Operating expenses:
Selling expenses 13,983,993 10,631,419 7,117,955 5,443,808
General and
administrative
expenses 3,898,871 2,165,650 1,731,613 685,644
Total operating
expenses 17,882,864 12,797,069 8,849,568 6,129,452
Income from
operations 8,237,926 8,042,448 2,745,108 2,940,554
Non-operating
income (expense):
Increase (decrease)
in fair value of
warrants 7,801,649 (13,438,420) -- (13,797,941)
Interest income 344,928 153,106 195,810 89,447
Interest expense (10,381) (20,796) (8,201) --
Total non-operating
income (loss) 8,136,196 (13,306,110) 187,609 (13,708,494)
Income (loss)
before income
taxes 16,374,122 (5,263,662) 2,932,717 (10,767,940)
Income taxes 2,378,902 2,156,759 820,348 687,178
Net income (loss) $13,995,220 $(7,420,421) $2,112,369 $(11,455,118)
Comprehensive
income statement:
Net income (loss) $13,995,220 $(7,420,421) $2,112,369 $(11,455,118)
Foreign currency
translation
adjustment 45,485 355,807 173,612 3,619
Comprehensive
income (loss) $14,040,705 $(7,064,614) $2,285,981 $(11,451,499)
Weighted average
number of shares
outstanding:
Basic 29,613,671 20,882,353 29,667,924 20,882,353
Diluted 40,332,126 20,882,353 39,859,213 20,882,353
Earnings per share:
Basic $0.47 $(0.36) $0.07 $(0.55)
Diluted $0.35 $(0.36) $0.05 $(0.55)
QKL STORES INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
June 30, 2010 Dec. 31, 2009
(Unaudited)
ASSETS
Cash $59,425,047 $45,912,798
Restricted cash 126,071 181,836
Accounts receivable 251,257 283,929
Inventories 19,015,610 24,691,156
Other receivables 14,035,311 13,980,572
Prepaid expenses 3,278,525 2,993,191
Advances to suppliers 3,006,059 2,965,139
Deferred income tax assets 675,142 417,788
Total current assets 99,813,022 91,426,409
Property, plant and equipment, net 18,765,300 29,402,630
Land use rights, net 741,833 753,226
Goodwill 19,304,862 19,280,509
Other assets 399,593 408,391
Total assets $139,024,610 $141,271,165
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $22,887,547 $29,244,923
Cash card and coupon liabilities 7,562,001 7,721,630
Customer deposits received 694,888 3,862,890
Accrued expenses and other payables 7,110,101 6,656,089
Income taxes payable 1,307,798 1,154,229
Total current liabilities 39,562,335 48,639,761
Warrant liabilities -- 44,304,034
Total liabilities 39,562,335 92,943,795
Commitments and contingencies -- --
Stockholders' equity
Common stock, $.001 par value per
share, authorized 100,000,000
shares, issued and outstanding
29,682,441 and 29,475,983 shares at
June 30, 2010 and December 31, 2009,
respectively 29,682 29,476
Series A convertible preferred stock,
par value $0.01, authorized
10,000,000 shares, issued and
outstanding 7,356,698 and 7,548,346
at June 30, 2010 and December 31,
2009, respectively 73,567 75,483
Additional paid-in capital 90,287,127 53,191,217
Retained earnings - appropriated 4,913,072 4,913,072
Accumulated deficit (240,891) (14,236,111)
Accumulated other comprehensive
income 4,399, 718 4,354,233
Total stockholders' equity 99,462,275 48,327,370
Total liabilities and stockholders'
equity $139,024,610 $141,271,165
QKL STORES INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended June 30,
2010 2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $13,995,220 $ (7,420,421)
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation - property, plant and
equipment 2,309,342 1,163,183
Amortization 13,662 13,571
Share-based compensation 591,814
Deferred income tax (256,827)
Change in fair value of warrants (7,801,649) 13,438,420
Adjustments to reconcile net income
to net cash provided by operating
activities:
Accounts receivable 33,031
Inventories 5,706,734 1,188,388
Other receivables (37,080) 162,191
Prepaid expenses (272,240) 23,547
Advances to suppliers 401,054 530,497
Accounts payable (6,394,315) (535,559)
Cash card and coupon liabilities (169,382) 476,596
Customer deposits received (3,172,881) (1,634,551)
Accrued expenses and other payables 187,656 319,162
Income taxes payable 152,112 (573,684)
Net cash provided by operating
activities 5,286,251 7,151,340
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and
equipment (2,831,895) (3,103,502)
Refund of office building purchase
payment 11,015,480
Decrease of restricted cash 55,765 90,677
Net cash used in investing activities 8,239,350 (3,012,825)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of bank loan -- (2,191,947)
Net cash used in financing activities -- (2,191,947)
Effect of foreign currency
translation (13,352) 45,256
Net increase in cash
Cash - beginning of period 45,912,798 19,285,021
Cash - end of period $59,425,047 $21,276,845
Supplemental disclosures of cash flow
information:
Interest received 344,928 153,106
Interest paid $10,381 $20,796
Income taxes paid $2,495,550 $2,681,834
Source: QKL Stores Inc.
