QKL Stores Inc. Announces Fourth Quarter and Full Year 2013 Financial Results

DAQING, China, April 4, 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 fourth quarter and full year financial results ended December 31, 2013.

Mr. Zhuangyi Wang, Chairman and CEO, said, "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 2014 and believe we'll see an improvement in operating expenses and profit growth in coming quarters.

"In 2013, we closed three stores that have approximately 6,500 square meters of space. As of December 31, 2013, we operated 27 supermarkets, 14 hypermarkets, 4 department stores and 2 distribution centers situated in Daqing, and Harbin, respectively.

"As we advance into 2014, we expect to open three new supermarket or hypermarket 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."

Fourth Quarter 2013 Financial Results

Revenue in the fourth quarter of 2013 decreased by 21.5% to $67.5 million from $86.0 million in the fourth quarter of 2012. Comparable stores are stores that were opened for at least one year before the beginning of the comparison  period, or by January 1, 2012. Those 45 stores generated approximately $67.5 million in sales in the fourth quarter of 2013, representing a decrease of $5.2 million, or 7.2% compared with $72.7 million in sales in fiscal 2012.

Gross profit decreased by 21.7% year over year to $11.5 million, compared to $14.6 million in the prior year period. Gross profit as a percentage of revenue for the fourth quarter of 2013 was 17.0%, compared to 17.0% for the fourth quarter of 2012.

Operating expenses decreased by 17.2% to $17.3 million compared to $20.9 million in the prior year period. This was primarily a result of our decrease in net sales in the fourth quarter of 2013.

We had a net loss of $11.6 million in the fourth quarter of 2013 compared with net loss of $30.8 million in the fourth quarter of 2012. Excluding the impairment of goodwill, we had a net loss of $11.6 million in the fourth quarter of 2013 compared with net income of $4.1 million in the fourth quarter of 2012.

Full Year 2013 Financial Results

Revenue decreased by $82.8 million, or 22.6%, to $282.8 million for fiscal 2013 from $365.6 million for fiscal 2012. The change in net sales was primarily attributable to the following: comparable stores are stores that were opened for at least one year before the beginning of the comparison period, or by January 1, 2012. Those 45 stores generated approximately $277.7 million sales in fiscal 2013, a decrease of $50.2 million, or 15.3% compared with $327.9 million sales in fiscal 2012.

Gross profit, or total revenue minus cost of sales, was decreased by $14.0 million, or 22.4%, to $48.4 million, or 17.1% of net sales, in fiscal 2013 from $62.4 million, or 17.1% of net sales, in fiscal 2012. The change in gross profit was primarily attributable to net sales decreased by $82.8 million in fiscal 2013 compared to fiscal 2012.

Operating expenses decreased by $12.2 million, or 20.7%, to $46.9 million, or 16.6% of net sales, in fiscal 2013 from $59.1 million, or 16.2% of net sales, in fiscal 2012. The change in selling expense was mainly due to decreases in labor costs, and utilities for fiscal 2013 compared with fiscal 2012. In particular, labor costs decreased by $3.3 million or 14.6%, to $19.3 million in fiscal 2013 from $22.6 million in fiscal 2012.  Utilities decreased by $1.5 million, or 20.3%, to $6.2 million in fiscal 2013 from $7.7 million in fiscal 2012.

We had a net loss of $14.3 million in fiscal 2013 compared with net loss of $31.0 million in fiscal 2012. Excluding the impairment of goodwill, adjusted net loss for fiscal 2013 changed to $14.3 million, or $(9.41) per diluted share, from adjusted net income of $4.3 million, or $3.31 per diluted share for fiscal 2012. The number of shares used in the computation of diluted EPS (excluding the impairment of goodwill) increased by 15.6% to 1,519,258 shares in fiscal 2013 from 1,313,684 shares in fiscal 2012.

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.

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SOURCE QKL Stores Inc.