QKL Stores Inc. Announces Second Quarter 2015 Financial Results

-- 2Q15Revenue increased by 9.2% to $56.4 million from $51.7 million in 2Q14 --

-- 2Q15 Gross Profit decreased by 4.3% to $9.1 million from $8.7 million in 2Q14 --

Aug 14, 2015, 06:00 ET from QKL Stores Inc.

DAQING, China, Aug. 14, 2015 /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 second quarter ended June 30, 2015.

Mr. Zhuangyi Wang, Chairman and CEO, said, "In the second quarter, we were more active with the level of promotional activities among our existing stores opened at least one year in order to strengthen our competitive position. We plan to slow down the pace of our new store openings. Currently, we expect to open two new supermarket stores this year. We maintain confidence in our strategy of strengthening our store presence in Tier 4 and 5 cities in northeastern China as well as in our core region of operation around Daqing where the majority of our older stores are based."

"As QKL expands its market presence in northeast China, we are uniquely positioned against our local competitors through our large product offering, strong supplier relationships, efficient distribution network and state-of-the-art IT system.  We are comfortable with our opportunities in the second half of the year and believe we'll see an improvement in operating expenses and net result from the current quarter."

Second Quarter 2015 Financial Results

Net sales increased by $4.8million, or 9.2%, to $56.4 million for the three months ended June 30, 2015 from $51.7 million for the three months ended June 30, 2014. The change in net sales was primarily attributable to the following: 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, 2014. Same store (41 stores) sales generated approximately $49.1 million in sales in the second quarter of 2015, a decrease of $0.8 million, or 1.6%, compared with $49.9 million in net sales in the second quarter of 2014. New store sales increased, reflecting the opening of 4 new stores since January 1, 2014. These stores generated approximately $4.4 million in sales in the second quarter of 2015. The number of stores including supermarkets/hypermarkets and department stores at June 30, 2015 was 45 versus 46 at June 30, 2014.

Gross profit, or total revenue minus cost of sales, increased by $0.4 million, or 4.3%, to $9.1 million, or 16.1% of net sales, in the second quarter of 2015 from $8.7 million, or 16.8% of net sales, in the second quarter of 2014. The change in gross profit was primarily attributable to a increase in net sales of $4.8million and a increase in cost of sales of $4.4 million in the second quarter of 2015 compared to the second quarter of 2014.The decrease in gross profit relative to net sales was due to competitions arising from the increasing challenge from the online shopping that have significant pricing pressure on our selling of high margin products.

Selling expenses increased by $1.0 million, or 11.1%, to $10.5 million, or 18.6% of net sales, in the second quarter of 2015, and$9.5 million, or 18.3% of net sales, in the second quarter of 2014. In specific, labor costs increased by $0.4 million or 7.3%, to $5.9 million in the second quarter of 2015 from $5.5 million in the second quarter of 2014.  Promotion expenses increased by $0.3 million, or37.5%, to $1.1 million in the second quarter of 2015 from $0.8 million in the second quarter of 2014.  Utilities increased by $0.2 million, or 13.3%, to $1.7 million in the first quarter of 2015 from $1.5 million in the first quarter of 2014.

General and administrative expenses increased by $78,343, or 4.0%, to $2.0 million, or 3.6% of net sales, in the second quarter of 2015 from $2.0 million, or 3.8% of net sales, in the second quarter of 2014.There is no significant change to our general and administrative expense.

Our net loss for the second quarter of 2015 was $4.5 million, or $2.98 per diluted share, from net loss of $3.8 million, or $2.47 per diluted share in the prior year period. The number of shares used in the computation of diluted EPS was1,522,326 for the second quarter of 2015 and 2014.

Conference Call

The Company will conduct a conference call to discuss its first quarter 2015 results on Friday, May 15, 2015 at 8:30 am ET. Listeners may access the call by dialing #1-719-325-2455. To participate, please dial one of the local access numbers, listed below. The conference call identification number is 10046673.

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: 4001-201203 China (S) Toll Free: 4001-201203 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

June 30,  2015

December 31, 2014

(Unaudited)

ASSETS

Cash

$

$36,722,485

$

9,013,006

Restricted cash

21,362,877

8,623,748

Accounts receivable

900,778

949,211

Inventories

41,149,824

62,605,754

Other receivables

19,431,891

21,375,611

Prepaid expenses

11,205,607

12,114,028

Advances to suppliers

9,039,376

8,653,037

Deferred income tax assets – current portion

2,835,577

2,839,714

Total current assets

142,648,415

126,174,109

Property, plant and equipment, net

37,379,217

37,843,171

Land use rights, net

671,140

684,375

Deferred income tax assets – non-current portion

62,057

61,681

Other assets

12,021

11,880

Total assets

$

180,772,850

$

164,775,216

LIABILITIES AND SHAREHOLDERS' EQUITY

Short-term loans

$

85,614,196

$

60,201,757

Accounts payable

36,649,329

37,206,633

Cash card and coupon liabilities

14,268,133

14,539,728

Customer deposits received

1,940,154

2,005,136

Accrued expenses and other payables

23,297,704

23,147,611

Income taxes payable

97,270

241,189

Total current liabilities

161,866,786

137,342,054

Total liabilities

161,866,786

137,342,054

Shareholders' equity

Common stock, $0.001 par value per share, authorized 100,000,000 shares, issued and outstanding 1,522,326 shares at June 30, 2015 and December 31, 2014

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 June 30, 2015 and December 31, 2014

5,294

5,294

Additional paid-in capital

93,746,014

93,746,014

Retained earnings – appropriated

8,338,153

8,338,153

Retained earnings

(98,240,260)

(89,116,190)

Accumulated other comprehensive income

15,055,341

14,458,369

Total shareholders' equity

18,906,064

27,433,162

Total liabilities and shareholders' equity

$

180,772,850

$

164,775,216

 

QKL STORES INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income

(Unaudited)

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2015

2014

2015

2014

Net sales

$

56,433,109

$

51,655,611

$

148,990,795

$

137,688,287

Cost of sales

47,370,425

42,968,964

124,667,893

114,269,481

Gross profit

9,062,684

8,686,647

24,322,902

23,418,806

Operating expenses:

Selling expenses

10,506,151

9,456,970

26,837,972

22,737,153

General and administrative expenses

2,042,181

1,963,838

4,551,883

5,197,248

Total operating expenses

12,548,332

11,420,808

31,389,855

27,934,401

Loss from operations

(3,485,648)

(2,734,161)

(7,066,953)

(4,515,595)

Non-operating expense:

Interest income

203,388

254,517

289,829

484,616

Interest expense

(1,247,701)

(1,279,388)

(2,327,915)

(2,778,631)

Total non-operating expense

(1,044,313)

(1,024,871)

(2,038,086)

(2,294,015)

Loss before income taxes

(4,529,961)

(3,759,032)

(9,105,039)

(6,809,610)

Income taxes

10,936

3,867

19,031

9,739

Net loss

$

(4,540,897)

$

(3,762,899)

$

(9,124,070)

$

(6,819,349)

Comprehensive income statement:

Net loss

$

(4,540,897)

$

(3,762,899)

$

(9,124,070)

$

(6,819,349)

Foreign currency translation adjustment

49,781

21,002

596,972

(732,171)

Comprehensive loss

$

(4,491,116)

$

(3,741,897)

$

(8,527,098)

$

(7,551,520)

Weighted average number of shares outstanding:

Basic

1,522,326

1,522,326

1,522,326

1,522,326

Diluted

1,522,326

1,522,326

1,522,326

1,522,326

Losses per share:

Basic

$

(2.98)

$

(2.47)

$

(5.99)

$

(4.48)

Diluted

$

(2.98)

$

(2.47)

$

(5.99)

$

(4.48)

 

QKL STORES INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Six Months Ended June 30,

2015

2014

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$

(9,124,070)

$

(6,819,349)

Depreciation

2,230,013

3,279,750

Amortization

14,355

14,708

Share-based compensation

-

204,029

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

Accounts receivable

54,067

222,985

Inventories

21,277,993

16,863,267

Other receivables

2,068,199

(314,995)

Prepaid expenses

979,528

5,042,852

Advances to suppliers

(332,742)

2,847,162

Accounts payable

(781,752)

(1,367,629)

Cash card and coupon liabilities

(359,160)

(293,696)

Customer deposits received

(76,983)

73,164

Accrued expenses and other payables

17,316

447,597

Income taxes payable

(144,993)

(33,029)

Net cash provided by operating activities

15,821,771

20,166,816

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property, plant and equipment

(337,492)

(1,603,149)

Increase of restricted cash

(12,652,235)

-

Net cash used in investing activities

(12,989,727)

(1,603,149)

CASH FLOWS FROM FINANCING ACTIVITIES:

Repayment of bank borrowings

(35,916,022)

(16,275,750)

Bank loan borrowing

60,893,982

35,806,650

Net cash provided by financing activities

24,977,960

19,530,900

Effect of foreign currency translation

(100,523)

(172,551)

Net increase in cash

27,810,004

38,094,567

Cash – beginning of period

9,013,006

9,245,212

Cash – end of period

$

36,722,487

$

47,167,228

Supplemental disclosures of cash flow information:

Interest paid

$

2,327,915

$

2,789,480

Income taxes paid

$

260,494

$

23,252

SOURCE QKL Stores Inc.



RELATED LINKS

http://www.qklstoresinc.com