QKL Stores Inc. Announces Third Quarter 2015 Financial Results

-- 3Q15 Revenue decreased by 4.1% to $58.6 million from $61.1 million in 3Q14 --

-- 3Q15 Gross Profit decreased by 4.5% to $9.8 million from $10.3 million in 3Q14 --

Nov 16, 2015, 06:30 ET from QKL Stores Inc.

DAQING, China, Nov. 16, 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 third quarter ended September 30, 2015.

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."

"The environment of retailing business is still challenging mainly due to the rising costs and the emerging e-commerce channel. However, we are still confident on the domestic needs because of the urbanization of the third and fourth tier cities that we will achieve a fundamental improvement in the 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 2015 Financial Results

Revenue in 3rd quarter decreased by $2.5 million, or 4.1%, to $58.6 million for the three months ended September 30, 2015 from $61.1 million for the three months ended September 30, 2014. 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 (42 stores) sales generated approximately $54.8 million in sales in the third quarter of 2015, a decrease of $4.4 million, or 7.4% compared with $59.2 million in net sales in the third quarter of 2014. New store sales increased, reflecting the opening of 3 new stores since January 1, 2014. These stores generated approximately $3.8 million in sales in the third quarter of 2015. The number of stores including supermarkets/hypermarkets and department stores at September 30, 2015 was 45 versus 47 at September 30, 2014.

Gross profit, or total revenue minus cost of sales, decreased by $0.5 million, or 4.5%, to $9.8 million, or 16.7% of net sales, in the third quarter of 2015 from $10.3 million, or 16.8% of net sales, in the third quarter of 2014. The change in gross profit was primarily attributable to a decrease in net sales of $2.5 million and a decrease in cost of sales of $2.0 million in the third quarter of 2015 compared to the third 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 decreased by $2.5 million, or 19.4%, to $10.5 million, or 18.0% of net sales, in the third quarter of 2015, and $13.1 million, or 21.4% of net sales, in the third quarter of 2014. In specific, labor costs decreased by $0.3 million or 5.2%, to $5.5 million in the third quarter of 2015 from $5.8 million in the third quarter of 2014. Promotion expenses decreased by $0.3 million, or 20.0%, to $1.2 million in the third quarter of 2015 from $1.5 million in the third quarter of 2014.  Utilities decreased by $0.2 million, or 11.8%, to $1.5 million in the first quarter of 2015 from $1.7 million in the third quarter of 2014. Preliminary expenses in relation to new store opening was nil and $1.5 million in the third quarter of 2015 and 2014 respectively.

General and administrative expenses decreased by $0.1 million, or 4.0%, to $2.0 million, or 3.3% of net sales, in the third quarter of 2015 from $1.9 million, or 3.3% of net sales, in the third quarter of 2014. There is no significant change to our general and administrative expense.

For the three months ended September 30, 2014, our net loss for the third quarter of 2015 was $3.8 million, or $2.53 per diluted share, from net loss of $5.5 million, or $3.60 per diluted share in the prior year period. The number of shares used in the computation of diluted EPS was 1,522,326 for the third quarter of 2015 and 2014.

Conference Call

The Company will conduct a conference call to discuss its third quarter 2015 results on Monday, November 16, 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

September 30,  2015

December 31, 2014

(Unaudited)

ASSETS

Cash

$

18,789,468

$

9,013,006

Restricted cash

20,506,868

8,623,748

Accounts receivable

936,843

949,211

Inventories

42,851,508

62,605,754

Other receivables

19,565,180

21,375,611

Prepaid expenses

11,232,673

12,114,028

Advances to suppliers

8,524,899

8,653,037

Deferred income tax assets -- current portion

2,828,440

2,839,714

Total current assets

125,235,879

126,174,109

Property, plant and equipment, net

34,335,416

37,843,171

Land use rights, net

637,764

684,375

Deferred income tax assets -- non-current portion

59,570

61,681

Other assets

11,886

11,880

Total assets

$

160,280,515

$

164,775,216

LIABILITIES AND SHAREHOLDERS' EQUITY

Short-term loans

$

70,712,467

$

60,201,757

Accounts payable

35,689,016

37,206,633

Cash card and coupon liabilities

14,489,950

14,539,728

Customer deposits received

1,968,447

2,005,136

Accrued expenses and other payables

22,665,590

23,147,611

Income taxes payable

32,516

241,189

Total current liabilities

145,557,986

137,342,054

Total liabilities

145,557,986

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 September 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 September 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

(102,088,725)

(89,116,190)

Accumulated other comprehensive income

14,720,271

14,458,369

Total shareholders' equity

14,722,529

27,433,162

Total liabilities and shareholders' equity

$

160,280,515

$

164,775,216

 

 

QKL STORES INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income

(Unaudited)

(Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2015

2014

2015

2014

Net sales

$

58,624,419

$

61,121,016

$

207,615,214

$

198,809,303

Cost of sales

48,825,220

50,855,098

173,493,113

165,124,579

Gross profit

9,799,199

10,265,918

34,122,101

33,684,724

Operating expenses:

Selling expenses

10,523,974

13,062,967

37,361,946

35,800,120

General and administrative expenses

1,940,631

2,022,426

6,492,514

7,219,674

Total operating expenses

12,464,605

15,085,393

43,854,460

43,019,794

Loss from operations

(2,665,406)

(4,819,475)

(9,732,359)

(9,335,070)

Non-operating expense:

Interest income

250,179

241,800

540,008

726,416

Interest expense

(1,432,582)

(891,855)

(3,760,497)

(3,670,486)

Total non-operating expense

(1,182,403)

(650,055)

(3,220,489)

(2,944,070)

Loss before income taxes

(3,847,809)

(5,469,530)

(12,952,848)

(12,279,140)

Income taxes

656

11,357

19,687

21,096

Net loss

$

(3,848,465)

$

(5,480,887)

$

(12,972,535)

$

(12,300,236)

Comprehensive income statement:

Net loss

$

(3,848,465)

$

(5,480,887)

$

(12,972,535)

$

(12,300,236)

Foreign currency translation adjustment

(335,070)

675,064

261,902

(57,107)

Comprehensive loss

$

(4,183,535)

$

(4,805,823)

$

(12,710,633)

$

(12,357,343

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

$

(2.53)

$

(3.60)

$

(8.52)

$

(8.08)

Diluted

$

(2.53)

$

(3.60)

$

(8.52)

$

(8.08)

 

 

 

QKL STORES INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Nine Months Ended September 30,

2015

2014

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$

(12,972,535)

$

(12,300,236)

Depreciation

3,023,678

5,084,837

Amortization

23,903

24,173

Share-based compensation

-

306,309

Deferred income tax

(88,564)

(8,770)

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

Accounts receivable

(20,739)

233,589

Inventories

18,546,323

16,845,228

Other receivables

1,111,685

2,599,829

Prepaid expenses

481,141

2,916,696

Advances to suppliers

(173,189)

2,829,497

Accounts payable

(251,754)

(1,606,320)

Cash card and coupon liabilities

461,646

(293,403)

Customer deposits received

32,921

212

Accrued expenses and other payables

319,512

211,765

Income taxes payable

(206,596)

32,248

Net cash provided by operating activities

10,287,432

16,875,654

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property, plant and equipment

(742,895)

(3,229,057)

Increase of restricted cash

(12,553,657)

-

Net cash used in investing activities

(13,296,552)

(3,229,057)

CASH FLOWS FROM FINANCING ACTIVITIES:

Repayment of bank borrowings

(71,758,322)

(16,259,555)

Bank loan borrowing

84,716,935

35,771,021

Net cash provided by financing activities

12,958,613

19,511,466

Effect of foreign currency translation

(173,031)

202,404

Net increase in cash

9,949,493

33,360,467

Cash -- beginning of period

9,013,006

9,245,212

Cash -- end of period

$

18,789,468

$

42,605,679

Supplemental disclosures of cash flow information:

Interest paid

$

3,760,497

$

3,670,486

Income taxes paid

$

228,360

$

65,184

 

 

SOURCE QKL Stores Inc.



RELATED LINKS

http://www.qklstoresinc.com