QKL Stores Inc. Announces First Quarter 2013 Financial Results

DAQING, China, May 14, 2013 /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, 2013.

Mr. Zhuangyi Wang, Chairman and CEO, said, "We finished the first quarter operating a total of 46 stores, comprised of 28 supermarkets, 14 hypermarkets and 4 department stores. As our new store opening plan slows for 2013, the new stores are going to open particularly 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 2013 Financial Results

Revenue in the first quarter of 2013 decreased by 13.4% to $97.1 million from $112.0 million in the first quarter of 2012. Revenue performance reflected the 45 comparable stores, which are stores that have been open for at least one year before the beginning of the comparison period, or by January 1, 2012, as well as sales from the net opening of one new store since January 1, 2012.  Same-store sales were approximately $93.6 million in the first quarter of 2013, representing a decrease of 5.6% from $99.1 million in the first quarter of 2012. One new store opened since January 1, 2012 generated approximately $1.1 million in sales in the first quarter of 2013.

Gross profit decreased by 12.7% year over year to $16.6 million, compared to $19.1 million in the prior year period.  Gross margin for the first quarter of 2013 was 17.1%, compared to 17.0% for the first quarter of 2012. The decrease in gross profit was primarily attributable to a decrease in net sales of $14.9 million in the first quarter of 2013 compared to the first quarter of 2012.

Operating expenses decreased by 9.5% to $15.8 million compared to $17.5 million in the prior year period. This was primarily a result of lower salary, and reduced other operating costs related to the Company's decreased store count over the past year. Operating income for the first quarter of 2013 decreased to $0.80 million, or 0.8% of sales, from $1.5 million, or 1.4% of sales, in the first quarter of 2012.

First quarter 2013 net income was approximately $0.4 million, or $0.27 per diluted share, compared with $0.8 million, or $0.54 per diluted share, for the same period in 2012.

As of March 31, 2013, the Company had $32.5 million in unrestricted cash with bank loans of $15.9 million, compared to $36.1 million as of March 31, 2012 with bank loans of $9.5 million.

As of March 31, 2013, the Company operated 46 stores. The Company closed 2 stores in the first quarter of 2013 due to the expiration of the lease contracts.

The number of weighted average shares outstanding used in the computation of diluted EPS was approximately 1,510,828 in the first quarter 2013.

Net cash provided by operating activities for the 2013 first quarter was $24.3 million compared to $29.4 million in the prior year period. The decrease in cash provided by operating activities for the three months ended March 31, 2013 compared to the same period in 2012 primarily reflects the decrease in net sales for the three months ended March 31, 2013.

Conference Call

The Company will conduct a conference call to discuss its first quarter 2013 results on Tuesday, May 14, 2013 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 10014237.

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

(Financial Tables on Following Pages)

SOURCE QKL Stores Inc.