QKL Stores Inc. Announces Second Quarter 2013 Financial Results
-- 2Q13 Revenue decreased by 29.1% to $59.0 million from $83.2 million in 2Q12--
-- 2Q13 Gross Profit decreased by 30.3% to $10.1 million from $14.6 million in 2Q12 --
DAQING, China, Aug. 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 second quarter ended June 30, 2013.
Mr. Zhuangyi Wang, Chairman and CEO, said, "The second quarter was a period in which we focused on improving efficiency in our business. Our existing stores opened for more than a year continued to show stable gross profit margin of 17.2% which helps support the ramp up period of our newer stores, which typically take longer to reach profitability.
"We plan to open 3 additional stores this year. Most of the new stores we will open in the future will be located in the Heilongjiang Province where we have stronger relationships with local vendors and the cost of goods is slightly lower than the other two provinces (Liaoning and Jilin) in which we operate."
"As our new store opening plan modifies from the first half of the year, we believe that preliminary new store opening expenses will decrease in the coming quarters as our total store sales rise, labor & utility costs stabilize and new store marketing expenses ease. For the remaining two quarters of 2013, we believe our gross margin will remain stable in the 17%-17.5% range, selling expenses as a percent of total revenue will move back into the 15%-16% range and we'll return to profitability."
"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 the second half of the year and believe we'll see an improvement in operating expenses and profit growth from the current quarter."
Second Quarter 2013 Financial Results
Net sales decreased by $24.2 million, or 29.1%, to $59.0 million for the three months ended June 30, 2013 from $83.2 million for the three months ended June 30, 2012. The change in net sales was primarily attributable to the following: Same store sales represent sales from stores that were opened for at least one year before the beginning of the comparison period, or by April 1, 2012. Same store (44 stores) sales generated approximately $57.4 million sales in the second quarter of 2013, a decrease of $16.1 million, or 21.8% compared with $73.5 million net sales in the second quarter of 2012. New store sales decreased, reflecting the opening of one new store since April 1, 2012. The one store generated approximately $1.6 million sales in the second quarter of 2012. The number of stores including supermarkets/hypermarkets and department stores at June 30, 2013 was 45 versus 53 at June 30, 2012.
Gross profit, or total revenue minus cost of sales, decreased by $4.4 million, or 30.3%, to $10.1 million, or 17.2% of net sales, in the second quarter of 2013 from $14.6 million, or 17.5% of net sales, in the second quarter of 2012. The change in gross profit was primarily attributable to net sales decreased by $24.2 million in the second quarter of 2013 compared to the second quarter of 2012. The decrease in gross margin was primarily attributable to the increase in competition in Daqing area. We believe that our gross margin is likely to be between 17.0% and 17.5%, 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 decreased by $2.5 million, or 20.2%, to $9.9 million, or 16.7% of net sales, in the second quarter of 2013 from $12.4 million, or 14.9% of net sales, in the second quarter of 2012. The change in selling expenses was mainly due to a decrease in labor costs resulting from a decrease in the number of store employees, and a decrease in rent expense in the three months ended June 30, 2013 compared to the same period in 2012. In specific, labor costs decreased by $1.2 million or 24.4%, to $3.8 million in the second quarter of 2013 from $5.0 million in the second quarter of 2012. Rent expenses decreased by $0.5 million, or 22.0%, to $1.6 million in the second quarter of 2013 from $2.1 million in the second quarter of 2012.
General and administrative expenses decreased by $9,365, or 0.4%, to $2.1 million, or 3.5% of net sales, in the second quarter of 2013 from $2.1 million, or 2.5% of net sales, in the second quarter of 2012. There is no significant change to our general and administrative expense.
The Company reported a net loss of approximately $1.4 million or $(0.955) per diluted share, compared with net income of $9,611, or $0.006 per diluted share, for the same period in 2012.
As of June 30, 2013, the Company had $21.7 million in unrestricted cash with no bank loans, compared to $26.0 million as of June 30, 2012 with bank loans of $7.9 million.
Conference Call
Management will host a conference call at 8:30 am ET on Thursday, August 14th. To participate, please dial one of the local access numbers, listed below. The conference call identification number is 10017432.
Participant Dial In (Toll Free): |
1-800-860-2442 |
Participant International: |
1-412-858-4600 |
Canadian Dial In (Toll Free): |
1-866-605-3852 |
China (N) Toll Free: |
10-800-712-2304 |
China (S) Toll Free: |
10-800-120-2304 |
Hong Kong Toll Free: |
800-962475 |
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 |
|||||||
June 30, |
December 31, 2012 |
||||||
(Unaudited) |
|||||||
ASSETS |
|||||||
Cash |
$ |
21,689,658 |
$ |
8,479,413 |
|||
Restricted cash |
253 |
253 |
|||||
Accounts receivable |
772,247 |
796,897 |
|||||
Inventories |
39,544,056 |
59,812,645 |
|||||
Other receivables |
16,834,786 |
18,042,360 |
|||||
Prepaid expenses |
8,424,989 |
11,083,708 |
|||||
Advances to suppliers |
2,045,650 |
9,525,250 |
|||||
Deferred income tax assets |
6,064,661 |
6,327,932 |
|||||
Total current assets |
95,376,300 |
114,068,458 |
|||||
Property, plant and equipment, net |
43,512,666 |
45,439,360 |
|||||
Land use rights, net |
709,106 |
724,760 |
|||||
Goodwill |
- |
- |
|||||
Other assets |
12,972 |
12,976 |
|||||
Total assets |
$ |
139,611,044 |
$ |
160,245,554 |
|||
LIABILITIES AND SHAREHOLDERS' EQUITY |
|||||||
Short-term loans |
$ |
- |
$ |
15,832,555 |
|||
Accounts payable |
26,780,245 |
30,900,586 |
|||||
Cash card and coupon liabilities |
19,495,245 |
18,604,188 |
|||||
Customer deposits received |
1,155,176 |
1,248,278 |
|||||
Accrued expenses and other payables |
26,014,956 |
28,097,212 |
|||||
Income taxes payable |
23,301 |
2,726 |
|||||
Total current liabilities |
73,468,923 |
94,685,545 |
|||||
Total liabilities |
73,468,923 |
94,685,545 |
|||||
Shareholders' equity |
|||||||
Common stock, $0.001 par value per share, authorized 100,000,000 shares, issued and outstanding 1,522,326 and 1,443,948 shares at June 30, 2013 and December 31, 2012* respectively |
1,522 |
1,444 |
|||||
Series A convertible preferred stock, par value $0.01, authorized 10,000,000 shares, issued and outstanding 529,412 and 2,386,110 shares at June 30, 2013 and December 31, 2012 respectively |
5,294 |
23,861 |
|||||
Additional paid-in capital |
92,521,489 |
92,503,000 |
|||||
Retained earnings – appropriated |
8,323,312 |
8,323,312 |
|||||
Retained earnings |
(48,892,649) |
(47,841,708) |
|||||
Accumulated other comprehensive income |
14,183,153 |
12,550,100 |
|||||
Total shareholders' equity |
66,142,121 |
65,560,009 |
|||||
Total liabilities and shareholders' equity |
$ |
139,611,044 |
$ |
160,245,554 |
QKL STORES INC. AND SUBSIDIARIES |
||||||||||||||
Condensed Consolidated Statements of Income |
||||||||||||||
(Unaudited) |
(Unaudited) |
|||||||||||||
Three Months Ended June 30, |
Six Months |
|||||||||||||
2013 |
2012 |
2013 |
2012 |
|||||||||||
Net sales |
$ |
58,995,918 |
$ |
83,221,544 |
$ |
156,053,109 |
$ |
195,260,160 |
||||||
Cost of sales |
48,862,015 |
68,653,106 |
129,279,758 |
161,636,596 |
||||||||||
Gross profit |
10,133,903 |
14,568,438 |
26,773,351 |
33,623,564 |
||||||||||
Operating expenses: |
||||||||||||||
Selling expenses |
9,879,874 |
12,417,898 |
23,204,087 |
27,548,786 |
||||||||||
General and administrative expenses |
2,080,136 |
2,089,501 |
4,598,472 |
4,465,275 |
||||||||||
Total operating expenses |
11,960,010 |
14,507,399 |
27,802,559 |
32,014,061 |
||||||||||
Income (loss) from operations |
(1,826,107) |
61,039 |
(1,029,208) |
1,609,503 |
||||||||||
Non-operating income (expense): |
||||||||||||||
Interest income |
261,991 |
78,243 |
455,564 |
104,771 |
||||||||||
Interest expense |
(226,280) |
(101,739) |
(523,888) |
(395,648) |
||||||||||
Total non-operating income (expense) |
35,711 |
(23,496) |
(68,324) |
(290,877) |
||||||||||
Income (loss) before income taxes |
(1,790,396) |
37,543 |
(1,097,532) |
1,318,626 |
||||||||||
Income taxes |
(336,185) |
27,932 |
(46,591) |
478,414 |
||||||||||
Net income (loss) |
$ |
(1,454,211) |
$ |
9,611 |
$ |
(1,050,941) |
$ |
840,212 |
||||||
Comprehensive income statement: |
||||||||||||||
Net income (loss) |
$ |
(1,454,211) |
$ |
9,611 |
$ |
(1,050,941) |
$ |
840,212 |
||||||
Foreign currency translation adjustment |
447,273 |
88,676 |
1,633,053 |
951,153 |
||||||||||
Comprehensive income (loss) |
$ |
(1,006,938) |
$ |
98,287 |
$ |
582,112 |
$ |
1,791,365 |
||||||
Weighted average number of shares outstanding: |
||||||||||||||
Basic* |
1,522,326 |
1,312,531 |
1,516,140 |
1,309,296 |
||||||||||
Diluted* |
1,522,326 |
1,543,304 |
1,516,140 |
1,543,319 |
||||||||||
Earnings (losses) per share: |
||||||||||||||
Basic* |
$ |
(0.955) |
$ |
0.006 |
$ |
(0.693) |
$ |
0.547 |
||||||
Diluted* |
$ |
(0.955) |
$ |
0.006 |
$ |
(0.693) |
$ |
0.544 |
QKL STORES INC. AND SUBSIDIARIES |
||||||
Condensed Consolidated Statements of Cash Flows |
||||||
(Unaudited) |
||||||
Six Months |
||||||
2013 |
2012 |
|||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||
Net income (loss) |
$ |
(1,050,941) |
$ |
840,212 |
||
Depreciation – property, plant and equipment |
3,280,567 |
3,284,259 |
||||
Amortization |
16,172 |
14,448 |
||||
Share-based compensation |
408,234 |
432,316 |
||||
Deferred income tax |
390,291 |
33,418 |
||||
Loss on disposal of fixed assets |
25,646 |
6,142 |
||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||
Accounts receivable |
40,727 |
13,166 |
||||
Inventories |
21,299,200 |
13,391,747 |
||||
Other receivables |
1,669,983 |
(3,591,849) |
||||
Prepaid expenses |
2,861,272 |
1,036,426 |
||||
Advances to suppliers |
7,603,073 |
3,089,043 |
||||
Accounts payable |
(4,713,502) |
(940,910) |
||||
Cash card and coupon liabilities |
501,696 |
188,706 |
||||
Customer deposits received |
(117,765) |
(496,420) |
||||
Accrued expenses and other payables |
(2,776,056) |
5,193,327 |
||||
Income taxes payable |
20,322 |
(54,310) |
||||
Net cash provided by operating activities |
29,458,919 |
22,439,721 |
||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||
Purchases of property, plant and equipment |
(538,595) |
(2,354,873) |
||||
Decrease of restricted cash |
- |
- |
||||
Net cash used in investing activities |
(538,595) |
(2,354,873) |
||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||
Bank loan repayment |
(16,005,275) |
(3,164,707) |
||||
Net cash used in financing activities |
(16,005,275) |
(3,164,707) |
||||
Effect of foreign currency translation |
295,196 |
83,083 |
||||
Net increase in cash |
12,915,049 |
16,920,141 |
||||
Cash – beginning of period |
8,479,413 |
9,037,550 |
||||
Cash – end of period |
$ |
21,689,658 |
$ |
26,040,774 |
||
Supplemental disclosures of cash flow information: |
||||||
Interest paid |
$ |
523,888 |
$ |
395,983 |
||
Income taxes paid |
$ |
205,035 |
$ |
533,130 |
SOURCE QKL Stores Inc.
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