QKL Stores Inc. Announces Third Quarter 2012 Financial Results

-- 3Q12 Revenue increased by 2.8% to $84.3 million from $82.1 million in 3Q11 --

-- 3Q12 Gross Profit decreased by 0.3% to $14.15 million from $14.19 million in 3Q11 --

Nov 14, 2012, 06:30 ET from QKL Stores Inc.

DAQING, China, Nov. 14, 2012 /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, 2012.

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 1 additional store this year.  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." 

"As our new store opening plan modifies from the first half of the year, we believe that preliminary new store opening expenses will decrease in the coming quarters as our total store sales rise, labor & utility costs stabilize and new store marketing expenses ease.  For the remaining one quarters of 2012, we believe our gross margin will remain stable in the 16.8%-17.3% range, operating expenses as a percent of total revenue will move back into the 14.5%-15.5% range."

"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 2012 Financial Results

Revenue in the third quarter of 2012 increased by $2.2 million, or 2.8%, to $84.3 million for the three months ended September 30, 2012 from $82.1 million for the three months ended September 30, 2011. Same store sales represent sales from stores that were opened for at least one year before the beginning of the comparison period, or by July 1, 2011. Same store (47 stores) sales generated approximately $78.1 million sales in the third quarter of 2012, an increase of $2.7 million, or 3.6% compared with $75.4 million net sales in the third quarter of 2011. New store sales increased, reflecting the net opening of 4 new stores since July 1, 2011. The new stores generated approximately $4.1 million sales in the third quarter of 2012.

Gross profit decreased by 0.3% year-over-year to $14.15 million, compared to $14.19 million in the prior year period. The decrease in gross margin was primarily attributable to the increase in competition in Daqing area. In this competitive marketplace, it is likely that we will focus on providing our customers with low prices in order to increase our market share and long-term sales volume.

Selling expenses increased by $0.3 million, or 2.2%, to $13.3 million, or 15.8% of net sales, in the third quarter of 2012 from $13.0 million, or 15.9% of net sales, in the third quarter of 2011. The change in selling expense was mainly due to increase in labor costs resulting from an increase in the number of store employees and pay increases.

General and administrative expenses decreased by $0.2 million, or 11.1%, to $2.1 million, or 2.5% of net sales, in the third quarter of 2012 from $2.3 million, or 2.8% of net sales, in the third quarter of 2011. The decrease was mainly due to our control on our headquarters' expenses.

For the three months ended September 30, 2012, our net loss was $1.1 million, or $(0.105) per diluted share, compared to $0.8 million, or ($0.082) per diluted share, for the three months ended September 30, 2011. 

As of September 30, 2012, the Company had $27.4 million in unrestricted cash and bank loans of $15.8 million, compared to $28.0 million as of September 30, 2011 with bank loans of $3.1 million.

As of September 30, 2012, the Company operated 51 stores totaling 275,000 sq. meters compared to 53 stores totaling 283,000 sq. meters in the prior year period.

Conference Call

Management will host a conference call at 8:30 am ET on Wednesday, November 14th, 2012. To participate, please dial one of the local access numbers, listed below. The conference call identification number is 10017432.

Participant Dial In (Toll Free):                             

1-800-860-2442

Participant International:                                      

1-412-858-4600

Canadian Dial In (Toll Free):                               

1-866-605-3852

China (N) Toll Free:                                           

10-800-712-2304

China (S) Toll Free:                                           

10-800-120-2304

Hong Kong Toll Free:                                        

800-962475

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, 

2012

December 31,

2011

(Unaudited)

ASSETS

Cash

$

27,387,082

$

9,037,550

Restricted cash

253

253

Accounts receivable

117,230

115,163

Inventories

45,567,703

54,336,501

Other receivables

8,990,737

11,991,134

Prepaid expenses

5,945,518

6,085,379

Advances to suppliers

8,124,527

10,160,552

Deferred income tax assets

2,979,111

2,972,570

Total current assets

99,112,161

94,699,102

Property, plant and equipment, net

41,973,123

43,042,136

Land use rights, net

725,192

748,410

Goodwill

26,567,797

26,346,942

Other assets

468,894

520,559

Total assets

$

168,847,167

$

165,357,149

LIABILITIES AND SHAREHOLDERS' EQUITY

Short-term loans

$

15,787,812

$

10,998,162

Accounts payable

26,508,022

28,417,894

Cash card and coupon liabilities

16,273,617

16,024,437

Customer deposits received

791,673

931,604

Accrued expenses and other payables

14,005,318

14,328,656

Income taxes payable

176,242

227,016

Total current liabilities

73,542,684

70,927,769

Total liabilities

73,542,684

70,927,769

Shareholders' equity

Common stock, $0.001 par value per share, authorized 100,000,000 shares, issued and outstanding  10,527,637 and 10,448,197 shares at September 30, 2012 and December 31, 2011, respectively*

10,527

10,448

Series A convertible preferred stock, par value $0.01, authorized 10,000,000 shares, issued and outstanding 5,457,960 and 5,694,549 at September 30, 2012 and December 31, 2011, respectively

54,580

56,945

Additional paid-in capital

91,828,974

91,610,531

Retained earnings – appropriated

7,282,560

7,282,560

Retained earnings

(16,025,611)

(15,758,416)

Accumulated other comprehensive income

12,153,453

11,227,312

Total shareholders' equity

95,304,483

94,429,380

Total liabilities and shareholders' equity

$

168,847,167

$

165,357,149

 

QKL STORES INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income

 

(Unaudited)

(Unaudited)

Three Months

Ended September 30,

Nine Months

Ended September 30,

2012

2011

2012

2011

Net sales

$

84,343,510

$

82,068,788

$

279,603,670

$

266,833,256

Cost of sales

70,189,152

67,874,242

231,825,748

219,918,263

Gross profit

14,154,358

14,194,546

47,777,922

46,914,993

Operating expenses:

Selling expenses

13,330,045

13,040,763

40,878,831

38,327,459

General and administrative expenses                                    

2,074,153

2,333,267

6,539,428

6,483,350

Total operating expenses

15,404,198

15,374,030

47,418,259

44,810,809

(Loss) income from operations

(1,249,840)

(1,179,484)

359,663

2,104,184

Non-operating income (expense):

Interest income

111,903

175,745

216,674

629,130

Interest expense

(295,564)

(10,593)

(691,212)

(41,693)

Total non-operating income (expense)

(183,661)

165,152

(474,538)

587,437

(Loss) income before income taxes

(1,433,501)

(1,014,332)

(114,875)

2,691,621

Income taxes

(326,094)

(164,822)

152,320

986,869

Net (loss) income

$

(1,107,407)

$

(849,510)

$

(267,195)

$

1,704,752

Comprehensive income statement:

Net (loss) income

$

(1,107,407)

$

(849,510)

$

(267,195)

$

1,704,752

Foreign currency translation adjustment

(25,012)

1,023,116

926,141

3,385,552

Comprehensive income

$

(1,132,419)

$

173,606

$

658,946

$

5,090,304

Weighted average number of shares outstanding:

Basic*

10,527,637

10,362,508

10,514,746

10,071,728

Diluted*

10,527,637

10,362,508

10,514,746

12,346,380

(Losses) earnings per share:

Basic*

$

(0.105)

$

(0.082)

$

(0.025)

$

0.138

Diluted*

$

(0.105)

$

(0.082)

$

(0.025)

$

0.138

 

 

QKL STORES INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

 

(Unaudited)

Nine Months

Ended September 30,

2012

2011

CASH FLOWS FROM OPERATING ACTIVITIES:

Net (loss) income

$

(267,195)

$

1,704,752

Depreciation – property, plant and equipment

4,926,896

5,815,703

Amortization

21,672

22,519

Share-based compensation

637,786

648,474

Deferred income tax

7,866

(225,151)

Loss on disposal of fixed assets

6,128

153,494

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

Accounts receivable

(1,510)

(562,574)

Inventories

9,041,509

3,086,917

Other receivables

3,319,138

18,037,812

Prepaid expenses

223,775

604,642

Advances to suppliers

2,087,430

(2,500,125)

Accounts payable

(2,049,728)

(3,476,958)

Cash card and coupon liabilities

171,689

2,975,779

Customer deposits received

(144,596)

(13,012)

Accrued expenses and other payables

(490,608)

2,996,074

Income taxes payable

(51,928)

(1,904,396)

Net cash provided by operating activities

17,438,324

27,363,950

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property, plant and equipment

(3,648,874)

(20,686,955)

Decrease of restricted cash

-

69,952

Net cash used in investing activities

(3,648,874)

(20,617,003)

CASH FLOWS FROM FINANCING ACTIVITIES:

Bank loan borrowing

7,902,077

3,074,081

Bank loan repayment

(3,157,562)

-

Net cash provided by financing activities

4,744,515

3,074,081

Effect of foreign currency translation

(184,433)

701,027

Net increase in cash

18,349,532

10,522,055

Cash – beginning of period

9,037,550

17,460,034

Cash – end of period

$

27,387,082

$

27,982,089

Supplemental disclosures of cash flow information: 

Interest paid

$

691,212

$

41,693

Income taxes paid

$

548,175

$

3,024,287

SOURCE QKL Stores Inc.



RELATED LINKS

http://www.qklstoresinc.com