QKL Stores Inc. Announces First Quarter 2014 Financial Results

DAQING, China, May 15, 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 first quarter ended March 31, 2014.

Mr. Zhuangyi Wang, Chairman and CEO, said, "We opened two hypermarkets in the first quarter, and finished the first quarter operating a total of 47 stores, comprised of 27 supermarkets, 16 hypermarkets and 4 department stores. As our new store opening plan slows for 2014, the two more new stores are going to open in the second half of the year, we expect our profitability to improve as we benefit from our improving new store sales, increased same store sales at existing stores and reduced store opening and promotional expenses." 

"We were also pleased with the improvement of our operating cash flows in the first quarter due to a reduction in inventory after the peak Chinese New Year season and a decrease in other receivables attributable to cash recovery from our vendors after the busy holiday season. We are pleased with our execution in the first quarter and are setting the stage for increased top and bottom line growth in the coming quarters."

First Quarter 2014 Financial Results

Revenue decreased by $11.1 million, or 11.4%, to $86.0 million for the three months ended March 31, 2014 from $97.1 million for the three months ended March 31, 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 (45 stores) sales generated approximately $81.8 million in sales in the first quarter of 2014, a decrease of $12.6 million, or 13.3% compared with $94.4 million in net sales in the first quarter of 2013. New store sales increased, reflecting the opening of two new stores since January 1, 2013. The stores generated approximately $4.2 million in sales in the first quarter of 2014. The number of stores including supermarkets/hypermarkets and department stores at March 31, 2014 was 47 versus 46 at March 31, 2013.

Gross profit decreased by $1.9 million, or 12.0%, to $14.7 million, or 17.1% of net sales, in the first quarter of 2014 from $16.6 million, or 17.1% of net sales, in the first quarter of 2013. The change in gross profit was primarily attributable to a decrease in net sales of $11.1 million in the first quarter of 2014 compared to the first quarter of 2013. We believe that our gross margin is likely to be between 16.8% and 17.3%, over the next few business quarters. New stores tend to be less profitable during their early months of operation. In addition, China's retail industry in general, and its supermarket industry in particular, are becoming more competitive every year. 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 were $13.3 million, or 15.4% of net sales, in the first quarter of 2014, and $13.3 million, or 13.7% of net sales, in the first quarter of 2013. The change in selling expenses was immaterial in the three months ended March 31, 2014 compared to the same period in 2013.

Our net loss for the first three months of 2014 was $3.1 million, or $2.01 per diluted share, from net income of $0.4 million, or $0.27 per diluted share in the prior year period. The number of shares used in the computation of diluted EPS was 1,522,326 and 1,510,828 for the first three months of 2014 and 2013, respectively.

At March 31, 2014, we had $30.2 million of cash compared to $32.5 million at March 31, 2013.

Conference Call

The Company will conduct a conference call to discuss its first quarter 2014 results on Thursday, May 15, 2014 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.

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

(Financial Tables on Following Pages)

SOURCE QKL Stores Inc.