QKL Stores Inc. Announces First Quarter 2010 Financial Results
-- 1Q'10 Revenue Increased 23% to $82.3 Million --
-- Quarterly Same Store Sales Increased 9.2% --
-- 1Q'10 Gross Profit Increased 23% to $14.5 Million --
-- 1Q'10 Non GAAP Net Income Increased 11% to $4.1 Million --
DAQING, China, May 17 /PRNewswire-Asia/ -- QKL Stores Inc. (the "Company") (Nasdaq: QKLS), a leading regional supermarket chain in Northeastern China, today announced its financial results for the quarter ended March 31, 2010.
Mr. Zhuangyi Wang, Chairman and CEO, said, "We are pleased to announce solid first quarter 2010 financial results, with revenue increasing by 23% on a year over year basis. During the first quarter, we opened two new supermarkets for an aggregate of 11,000 sq. meters, which reflected our efforts to open larger stores that can accommodate a greater assortment of grocery, fresh food and non-food items."
"We continue to make excellent progress building out our infrastructure to enhance overall scalability. We officially commenced operations in our new distribution center in Harbin, Heilongjiang, near the end of April. The new distribution center is integral to our expansion strategy as it enables us to expand the sourcing of products and fresh produce directly from manufacturers and farmers and to increase our private label offerings, which in turn contribute to reduced costs, increased profit margin and greater value for our customers."
First Quarter 2010 Financial Results
Revenue in the first quarter of 2010 increased 22.6% to $82.3 million from $67.1 million in the first quarter of 2009. Revenue performance reflected the growth of 28 comparable stores, which are stores that have been open for at least one year, as well as sales from the opening of 7 new stores since January 1, 2009. Same-store sales were approximately $68.7 million in the first quarter of 2010, an increase of 9.2% from $62.9 million in the first quarter of 2009.
Gross profit increased 22.9% year over year to $14.5 million from $11.8 million in the prior year period. Gross margin increased to 17.7% from 17.5% in the year ago period due to the increase in sales in the 2010 first quarter. The Company continues to believe that gross margin will be in the range of 17%-19% over the next few quarters.
Operating income increased 7.7% to $5.5 million from $5.1 million in the first quarter of 2009. Selling expenses increased 32.7% to $6.9 million, or 8.3% of total revenue, from $5.2 million, or 7.7% of total revenue, in the prior year period, as a result of increased salary, depreciation and rent expense commensurate with the Company's expansion.
General and administrative expenses increased 46.5% to $2.2 million, or 2.7% of total revenue, from $1.5 million, or 2.2% of total revenue, in the prior year period, primarily due to a non-cash stock compensation charge of approximately $0.6 million recognized in the first quarter of 2010.
Net income for the first quarter of 2010 increased to $11.9 million, or $0.29 per diluted share, from $4.0 million, or $0.13 per diluted share in the first quarter of 2009. Excluding changes in the fair value of warrants for the 2010 and 2009 first quarter periods, adjusted net income for the first quarter of 2010 increased 10.8% to $4.1 million, or $0.10 per diluted share, from $3.7 million, or $0.12 per diluted share, in the prior year period. The number of shares used in the computation of diluted EPS increased 34.7% to 40.4 million shares and 30.0 million shares, respectively.
As of March 31, 2010, the Company had $46.5 million in unrestricted cash, compared to $45.9 million as of December 31, 2009, and no debt or bank loans.
Retail Store Update
As previously announced, the Company opened two stores in the first quarter of 2010, compared to none in the first quarter of 2009. Its 35th supermarket, opened on March 24th, 2010, is located in Tangyuan, Heilongjiang, and has floor space of approximately 6,200 square meters. The Company's 36th supermarket, opened on March 31, 2010, is located in Daqing, Heilongjiang and has floor space of approximately 2,655 square meters. Both stores carry items in all three of the Company's core product categories.
Mr. Wang continued, "Our store opening plan, which targets opening 20 locations and a minimum total of 100,000 sq. meters of new store space in 2010, remains on track and should accelerate as we move into the second half of this year. We are confident that our strategic operational initiatives and store growth plan can expand our position as a leading chain in northeast China."
"We remain quite excited about the future prospects for our company. We have a highly capable management team, a sound balance sheet, and a profitable enterprise with strong top-line revenue growth. We have a solid retail growth plan and uniquely differentiated product offering which provide us with a strong foundation to leverage a growing market opportunity and enhance our future growth. We have the capability to establish QKL Stores as the leading supermarket chain in northeast China."
Conference Call
The Company will conduct a conference call to discuss its first quarter 2010 results on Monday, May 17, 2010 at 8:30am ET. Listeners may access the call by dialing 1-719-457-2640. To listen to the live webcast of the event, please go to http://www.viavid.net . Listeners may access the call replay, which will be available through May 31st, by dialing 1-719-457-0820; conference ID: 4421589.
About QKL Stores Inc.:
Based in Daqing, China, QKL Stores, Inc. is a leading regional supermarket chain company operating in Northeast China. 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: http://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.
For more information, please contact: QKL Stores, Inc. In U.S.: Crystal L. Chen, CFO Tel: +1-909-895-6516 Mike Li, Investor Relations Tel: +86-459-460-7987 ICR, Inc. In U.S.: Bill Zima Tel: +1-203-682-8200 In China: Wei-Jung Yang Tel: +86-10-6599-7968 (Financial Tables on Following Pages) QKL STORES INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets March 31, December 31, 2010 2009 (Unaudited) ASSETS Cash $46,529,122 $45,912,798 Restricted cash 146,962 181,836 Accounts receivable 177,124 283,929 Inventories 17,809,700 24,691,156 Other receivables 19,942,503 13,980,572 Prepaid expenses 2,478,182 2,993,191 Advances to suppliers 3,396,668 2,965,139 Deferred income tax assets 523,180 417,788 Total current assets 91,003,441 91,426,409 Property, plant and equipment, net 28,996,193 29,402,630 Land use rights, net 744,348 753,226 Goodwill 19,227,147 19,280,509 Other assets 389,677 408,391 Total assets $140,360,806 $141,271,165 LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $25,116,808 $29,244,923 Cash card and coupon liabilities 8,415,859 7,721,630 Customer deposits received 777,700 3,862,890 Accrued expenses and other payables 6,963,358 6,656,089 Income taxes payable 1,932,381 1,154,229 Total current liabilities 43,206,106 48,639,761 Warrant liabilities -- 44,304,034 Total liabilities 43,206,106 92,943,795 Commitments and contingencies -- -- Stockholders' equity Common stock, $.001 par value per share, authorized 100,000,000 shares, issued and outstanding 29,653,431 and 29,475,983 shares at March 31, 2010 and December 31, 2009, respectively 29,653 29,476 Series A convertible preferred stock, par value $0.01, authorized 10,000,000 shares, issued and outstanding 7,370,898 and 7,548,346 at March 31,2010 December 31, 2009, respectively 73,709 75,483 Additional paid-in capital 90,265,420 53,191,217 Retained earnings - appropriated 4,913,072 4,913,072 Accumulated deficit (2,353,260) (14,236,111) Accumulated other comprehensive income 4,226,106 4,354,233 Total stockholders' equity 97,154,700 48,327,370 Total liabilities and stockholders' equity $140,360,806 $141,271,165 QKL STORES INC. AND SUBSIDIARIES Condensed Consolidated Statements of Income (Unaudited) Three Months Ended March 31, 2010 2009 Restated Net sales $82,279,287 $67,099,111 Cost of sales 67,753,173 55,329,600 Gross profit 14,526,114 11,769,511 Operating expenses: Selling expenses 6,866,038 5,189,088 General and administrative expenses 2,167,258 1,479,598 Total operating expenses 9,033,296 6,668,686 Income from operations 5,492,818 5,100,825 Non-operating income (expense): Changes in fair value of warrants 7,801,649 359,521 Interest income 146,938 63,670 Interest expense -- (20,786) Total non-operating income 7,948,587 402,405 Income before income taxes 13,441,405 5,503,230 Income taxes 1,558,554 1,469,191 Net income $11,882,851 $4,034,039 Comprehensive income statement: Net income $11,882,851 $4,034,039 Foreign currency translation adjustment (128,127) 352,188 Comprehensive income statement $11,754,724 $4,386,227 Weighted average number of shares outstanding: Basic 29,558,976 20,882,353 Diluted 40,356,404 30,000,000 Earnings per share: Basic $0.40 $0.19 Diluted $0.29 $0.13 Condensed Consolidated Statements of Cash Flows (Unaudited) Three Months Ended March 31, 2010 2009 Restated CASH FLOWS FROM OPERATING ACTIVITIES: Net income $11,882,851 $4,034,039 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation - property, plant and equipment 1,182,186 569,605 Amortization 6,793 6,782 Share-based compensation 570,222 -- Deferred income tax (106,549) -- Loss on disposal of property, plant and equipment -- -- Change in fair value of warrants (7,801,649) (359,521) Adjustments to reconcile net income to net cash provided by operating activities: Accounts receivable 106,019 -- Inventories 6,813,119 1,533,604 Other receivables (6,000,627) 1,160,701 Prepaid expenses 524,309 (158,048) Advances to suppliers 330,749 452,468 Accounts payable (4,047,174) 618,116 Cash card and coupon liabilities 715,600 494,734 Customer deposits received (3,074,499) (1,459,228) Accrued expenses and other payables (413,901) (97,515) Income taxes payable 781,347 215,210 Net cash provided by operating activities 1,468,796 7,010,947 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment (888,146) (1,612,406) Decrease of restricted cash 34,874 62,799 Net cash used in investing activities (853,272) (1,549,607) CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of bank loan -- (2,190,872) Net cash used in financing activities -- (2,190,872) Effect of foreign currency 800 71,220 translation Net increase in cash 616,324 3,341,688 Cash - beginning of period 45,912,798 19,285,021 Cash - end of period $46,529,122 $22,626,709 Supplemental disclosures of cash flow information: Interest paid $-- $20,786 Income taxes paid $964,883 $1,220,800
SOURCE QKL Stores Inc.
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