omniture

QKL Stores Inc. Announces Third Quarter 2014 Financial Results

-- 3Q14 Revenue increased by 3.2% to $61.1 million from $59.2 million in 3Q13 --
-- 3Q14 Gross Profit increased by 1.4% to $10.3 million from $10.1 million in 3Q13 -
2014-11-13 21:30 2996

DAQING, China, November 13, 2014 /PRNewswire/ -- QKL Stores Inc. (the "Company") (Nasdaq: QKLS), a leading regional supermarket chain in Northeastern China and Inner Mongolia, today announced its financial results for the third quarter ended September 30, 2014.

Mr. Zhuangyi Wang, Chairman and CEO, said, "Our third quarter results generally met our levels of expectation. The variety, value and freshness of our products continue to resonate with our customers, driving sales higher. This store growth was also driven by in-store promotional events such as store anniversary celebrations.

"We plan to open two stores before year end. The new stores we will open in the future will be located in Daqing City where we have stronger relationships with local vendors and the cost of goods is slightly lower than the other cities in which we operate.

"The retailing business environment is still challenging, mainly due to rising costs and emerging e-commerce channels. However, we are still confident in domestic needs; because of the urbanization of third- and fourth-tier cities we will achieve a fundamental improvement in consumer purchasing power during the process.

"We look forward to the upcoming holiday season as we have a number of exciting marketing initiatives planed. Our balance sheet is healthy with a strong cash position, low level of debt and stable flow of cash from operations. We continue to make progress with our store operations and that can result in greater sales and profits over time."

Third Quarter 2013 Financial Results

Revenue in the third quarter of 2014 increased by $1.9 million, or 3.2%, to $61.1 million for the three months ended September 30, 2014 from $59.2 million for the three months ended September 30, 2013. Same store sales represents sales from stores that were opened for at least one year before the beginning of the comparison period, or by January 1, 2013. Same store (44 stores) sales generated approximately $56.2 million in sales in the third quarter of 2014, a decrease of $1.5 million, or 2.6%, compared with $57.7 million in net sales in the third quarter of 2013. New store sales increased, reflecting the opening of three new stores since January 1, 2013. These stores generated approximately $4.3 million in sales in the third quarter of 2014. The number of stores including supermarkets/hypermarkets and department stores at September 30, 2014 was 47 versus 45 at September 30, 2013.

Gross profit increased by $0.1 million, or 1.4%, to $10.3 million, or 16.8% of net sales, in the third quarter of 2014 from $10.1 million, or 17.1% of net sales, in the third quarter of 2013. The change in gross profit was primarily attributable to an increase in net sales of $1.9 million and an increase in cost of sales of $1.7 million in the third quarter of 2014 compared to the third quarter of 2013.

Selling expenses increased by $3.0 million, or 30.2%, to $13.1 million, or 21.4% of net sales, in the third quarter of 2014, from $10.0 million, or 16.9% of net sales, in the third quarter of 2013. The increase in selling expenses relative to net sales was due to the realizing of significant preliminary expenses of new stores opening of $1.8 million in the three months ended September 30, 2014 compared to nil in the same period in 2013.

General and administrative expenses decreased by $0.1 million, or 3.5%, to $2.0 million, or 3.3% of net sales, in the third quarter of 2014 from $2.1 million, or 3.5% of net sales, in the third quarter of 2013. There is no significant change to our general and administrative expense.

For the three months ended September 30, 2014, our net loss was $5.5 million, or $(3.60) per diluted share, compared to net loss of $1.7 million, or ($1.11) per diluted share, for the three months ended September 30, 2013. The number of shares used in the computation of diluted EPS was 1,522,326 for the third quarter of 2014 and 2013.

Conference Call

Management will host a conference call at 8:30 am ET on Friday, November 14th. To participate, please dial one of the local access numbers, listed below. The conference call identification number is 10017432.

Participant Dial In (Toll Free):

1-877-870-4263

Participant International:

1-412-317-0790

Canadian Dial In (Toll Free):

1-855-669-9657

China (N) Toll Free:

4001-201213

China (S) Toll Free:

4001-201213

Hong Kong Toll Free:

800-905945

About QKL Stores Inc.:

Based in Daqing, China, QKL Stores, Inc. is a leading regional supermarket chain company operating in Northeastern China and Inner Mongolia. 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: 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.

Contact Information

QKL Stores, Inc.

In China:
Mike Li, Investor Relations
+86-459-460-7987

QKL STORES INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets




September 30,
2014


December 31,
2013



(Unaudited)



ASSETS







Cash


$

42,605,679


$

9,245,212

Restricted cash



8,609,740



8,668,882

Accounts receivable



320,570



557,745

Inventories



47,453,891



64,724,923

Other receivables



19,231,805



21,979,152

Prepaid expenses



6,933,867



9,915,479

Advances to suppliers



4,942,444



7,822,660

Income taxes receivables



1,695,685



1,739,773

Deferred income tax assets - current portion



2,778,076



2,788,918

Total current assets



134,571,757



127,442,744

Property, plant and equipment, net



38,109,472



40,247,576

Land use rights, net



698,756



718,337

Deferred income tax assets - non-current portion



66,956



66,956

Other assets



17,276



17,276

Total assets


$

173,464,217


$

168,492,889

LIABILITIES AND SHAREHOLDERS' EQUITY







Short-term loans


$

60,103,964


$

40,889,761

Accounts payable



33,991,621



35,840,964

Cash card and coupon liabilities



18,045,922



18,465,030

Customer deposits received



977,804



984,308

Accrued expenses and other payables



18,910,586



18,827,472

Total current liabilities



132,029,897



115,007,535

Total liabilities



132,029,897



115,007,535








Shareholders' equity







Common stock, $0.001 par value per share, authorized 100,000,000 shares, issued and outstanding 1,522,326 shares at September 30, 2014 and December 31, 2013



1,522



1,522

Series A convertible preferred stock, par value $0.01, authorized 10,000,000 shares, issued and outstanding 529,412 shares at September 30, 2014 and December 31, 2013



5,294



5,294

Additional paid-in capital



93,644,266



93,337,957

Retained earnings - appropriated



8,329,586



8,329,586

Retained earnings



(74,446,030)



(62,145,794)

Accumulated other comprehensive income



13,899,682



13,956,789

Total shareholders' equity



41,434,320



53,485,354

Total liabilities and shareholders' equity


$

$173,464,217


$

168,492,889

QKL STORES INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income




(Unaudited)


(Unaudited)



Three Months
Ended September 30,


Nine Months
Ended September 30,



2014


2013


2014


2013

Net sales


$

61,121,016


$

59,243,560


$

198,809,303


$

215,296,669

Cost of sales



50,855,098



49,118,005



165,124,579



178,397,763

Gross profit



10,265,918



10,125,555



33,684,724



36,898,906














Operating expenses:













Selling expenses



13,062,967



10,031,669



35,800,120



33,235,756

General and administrative expenses



2,022,426



2,095,044



7,219,674



6,693,516

Total operating expenses



15,085,393



12,126,713



43,019,794



39,929,272














Loss from operations



(4,819,475)



(2,001,158)



(9,335,070)



(3,030,366)














Non-operating income (expense):













Interest income



241,800



190,224



726,416



645,788

Interest expense



(891,855)



(349,665)



(3,670,486)



(873,553)

Total non-operating expense



(650,055)



(159,441)



(2,944,070)



(227,765)














Loss before income taxes



(5,469,530)



(2,160,599)



(12,279,140)



(3,258,131)














Income taxes



11,357



(468,392)



21,096



(514,983)














Net loss


$

(5,480,887)


$

(1,692,207)


$

(12,300,236)


$

(2,743,148)














Comprehensive income statement:













Net loss


$

(5,480,887)


$

(1,692,207)


$

(12,300,236)


$

(2,743,148)

Foreign currency translation adjustment



675,064



954,945



(57,107)



2,587,998

Comprehensive loss


$

(4,805,823)


$

(737,262)


$

(12,357,343)


$

(155,150)














Weighted average number of shares outstanding:













Basic



1,522,326



1,522,326



1,522,326



1,555,978

Diluted



1,522,326



1,522,326



1,522,326



1,555,978














Losses per share:













Basic


$

(3.60)


$

(1.11)


$

(8.08)


$

(1.76)

Diluted


$

(3.60)


$

(1.11)


$

(8.08)


$

(1.76)

QKL STORES INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows




(Unaudited)



Nine Months Ended September 30,



2014


2013

CASH FLOWS FROM OPERATING ACTIVITIES:







Net loss


$

(12,300,236)


$

(2,743,148)

Depreciation



5,084,837



5,034,492

Amortization



24,173



24,361

Share-based compensation



306,309



612,351

Deferred income tax



(8,770)



880,073

Loss on disposal of fixed assets



-



25,755

Adjustments to reconcile net income to net cash provided by operating activities:







Accounts receivable



233,589



23,117

Inventories



16,845,228



20,708,613

Other receivables



2,599,829



523,424

Prepaid expenses



2,916,696



1,963,042

Advances to suppliers



2,829,497



4,947,618

Accounts payable



(1,606,320)



(3,428,459)

Cash card and coupon liabilities



(293,403)



1,748,812

Customer deposits received



212



(234,533)

Accrued expenses and other payables



211,765



(3,819,724)

Income taxes payable



32,248



20,408

Net cash provided by operating activities



16,875,654



26,286,202








CASH FLOWS FROM INVESTING ACTIVITIES:







Purchases of property, plant and equipment



(3,229,057)



(787,373)

Net cash used in investing activities



(3,229,057)



(787,373)








CASH FLOWS FROM FINANCING ACTIVITIES:







Bank loan borrowing



35,771,021



11,251,270

Bank loan repayment



(16,259,555)



(16,073,243)

Net cash provided by (used in) financing activities



19,511,466



(4,821,973)








Effect of foreign currency translation



202,404



457,364








Net increase in cash



33,360,467



21,134,220

Cash - beginning of period



9,245,212



8,479,413

Cash - end of period


$

42,605,679


$

29,613,633








Supplemental disclosures of cash flow information:







Interest paid


$

3,670,486


$

873,553

Income taxes paid


$

65,184


$

205,905

Source: QKL Stores Inc.
collection