QKL Stores Inc. Announces Second Quarter 2014 Financial Results
-- 2Q14 Revenue decreased by 12.4% to $51.7 million from $59.0 million in 2Q13 --
-- 2Q14 Gross Profit decreased by 14.3% to $8.7 million from $10.1 million in 2Q13 --
DAQING, China, Aug. 14, 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 second quarter ended June 30, 2014.
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 16.8% which helps support the ramp up period of our newer stores, which typically take longer to reach profitability.
"We plan to open 2 additional stores this year. These two 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 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 net result from the current quarter."
Second Quarter 2014 Financial Results
Net Sales –Net sales decreased by $7.3 million, or 12.4%, to $51.7 million for the three months ended June 30, 2014 from $59.0 million for the three months ended June 30, 2013. The change in net sales was primarily attributable to the following: 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 (44 stores) sales generated approximately $49.6 million in sales in the second quarter of 2014, a decrease of $3.8 million, or 7.1% compared with $53.4 million in net sales in the second quarter of 2013. New store sales increased, reflecting the opening of two new stores since January 1, 2013. These stores generated approximately $2.1 million in sales in the second quarter of 2014. The number of stores including supermarkets/hypermarkets and department stores at June 30, 2014 was 46 versus 45 at June 30, 2013.
Gross profit, or total revenue minus cost of sales, decreased by $1.4 million, or 14.3%, to $8.7 million, or 16.8% of net sales, in the second quarter of 2014 from $10.1 million, or 17.2% of net sales, in the second quarter of 2013. The change in gross profit was primarily attributable to a decrease in net sales of $7.3 million and a decrease in cost of sales of $5.9 million in the second quarter of 2014 compared to the second 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 decreased by $0.4 million, or 4.3%, to $9.5 million, or 18.3% of net sales, in the second quarter of 2014, and $9.9 million, or 16.7% of net sales, in the second quarter of 2013. The increase in selling expenses relative to net sales was due to the significant decrease in net sales in the three months ended June 30, 2014 compared to the same period in 2013.
General and administrative expenses decreased by $0.1 million, or 5.6%, to $2.0 million, or 3.8% of net sales, in the second quarter of 2014 from $2.1 million, or 3.5% of net sales, in the second quarter of 2013. There is no significant change to our general and administrative expense.
Our net loss for the second quarter of 2014 was $3.8 million, or $2.47 per diluted share, from net loss of $1.5 million, or $0.96 per diluted share in the prior year period. The number of shares used in the computation of diluted EPS was 1,522,326 for the second quarter of 2014 and 2013.
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): |
1-877-870-4263 |
| Participant International: |
1-412-317-0790 |
| Canadian Dial In (Toll Free): |
1-855-669-9657 |
| China (N) Toll Free: |
4001-201213 |
| China (S) Toll Free: |
4001-201213 |
| Hong Kong Toll Free: |
800-905945 |
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 |
||||||||
| June 30, |
December 31, |
|||||||
| (Unaudited) |
||||||||
| ASSETS |
||||||||
| Cash |
$ |
47,167,228 |
$ |
9,245,212 |
||||
| Restricted cash |
8,607,363 |
8,668,882 |
||||||
| Accounts receivable |
331,294 |
557,745 |
||||||
| Inventories |
47,439,533 |
64,724,923 |
||||||
| Other receivables |
22,232,748 |
21,979,152 |
||||||
| Prepaid expenses |
4,813,266 |
9,915,479 |
||||||
| Advances to suppliers |
4,926,266 |
7,822,660 |
||||||
| Income taxes receivables |
1,760,382 |
1,739,773 |
||||||
| Deferred income tax assets – current portion |
2,768,651 |
2,788,918 |
||||||
| Total current assets |
140,046,731 |
127,442,744 |
||||||
| Property, plant and equipment, net |
38,289,047 |
40,247,576 |
||||||
| Land use rights, net |
698,564 |
718,337 |
||||||
| Deferred income tax assets – non-current portion |
66,956 |
66,956 |
||||||
| Other assets |
17,276 |
17,276 |
||||||
| Total assets |
$ |
179,118,574 |
$ |
168,492,889 |
||||
| LIABILITIES AND SHAREHOLDERS' EQUITY |
||||||||
| Short-term loans |
$ |
60,087,370 |
$ |
40,889,761 |
||||
| Accounts payable |
34,221,996 |
35,840,964 |
||||||
| Cash card and coupon liabilities |
18,040,939 |
18,465,030 |
||||||
| Customer deposits received |
1,050,325 |
984,308 |
||||||
| Accrued expenses and other payables |
19,580,082 |
18,827,472 |
||||||
| Total current liabilities |
132,980,712 |
115,007,535 |
||||||
| Total liabilities |
132,980,712 |
115,007,535 |
||||||
| Shareholders' equity |
||||||||
| Common stock, $0.001 par value per share, authorized 100,000,000 shares, issued and outstanding 1,522,326 shares at June 30, 2014 and December 31, 2013 |
1,522 |
1,522 |
||||||
| Series A convertible preferred stock, par value $0.01, authorized 10,000,000 shares, issued and outstanding 529,412 shares at June 30, 2014 and December 31, 2013 |
5,294 |
5,294 |
||||||
| Additional paid-in capital |
93,541,985 |
93,337,957 |
||||||
| Retained earnings – appropriated |
8,329,586 |
8,329,586 |
||||||
| Retained earnings |
(68,965,143) |
(62,145,794) |
||||||
| Accumulated other comprehensive income |
13,224,618 |
13,956,789 |
||||||
| Total shareholders' equity |
46,137,862 |
53,485,354 |
||||||
| Total liabilities and shareholders' equity |
$ |
179,118,574 |
$ |
168,492,889 |
||||
| QKL STORES INC. AND SUBSIDIARIES |
||||||||||||||||
| (Unaudited) |
(Unaudited) |
|||||||||||||||
| Three Months |
Six Months |
|||||||||||||||
| 2014 |
2013 |
2014 |
2013 |
|||||||||||||
| Net sales |
$ |
51,655,611 |
$ |
58,995,918 |
$ |
137,688,287 |
$ |
156,053,109 |
||||||||
| Cost of sales |
42,968,964 |
48,862,015 |
114,269,481 |
129,279,758 |
||||||||||||
| Gross profit |
8,686,647 |
10,133,903 |
23,418,806 |
26,773,351 |
||||||||||||
| Operating expenses: |
||||||||||||||||
| Selling expenses |
9,456,970 |
9,879,874 |
22,737,153 |
23,204,087 |
||||||||||||
| General and administrative expenses |
1,963,838 |
2,080,136 |
5,197,248 |
4,598,472 |
||||||||||||
| Total operating expenses |
11,420,808 |
11,960,010 |
27,934,401 |
27,802,559 |
||||||||||||
| Loss from operations |
(2,734,161) |
(1,826,107) |
(4,515,595) |
(1,029,208) |
||||||||||||
| Non-operating income (expense): |
||||||||||||||||
| Interest income |
254,517 |
261,991 |
484,616 |
455,564 |
||||||||||||
| Interest expense |
(1,279,388) |
(226,280) |
(2,778,631) |
(523,888) |
||||||||||||
| Total non-operating income (expense) |
(1,024,871) |
35,711 |
(2,294,015) |
(68,324) |
||||||||||||
| Loss before income taxes |
(3,759,032) |
(1,790,396) |
(6,809,610) |
(1,097,532) |
||||||||||||
| Income taxes |
3,867 |
(336,185) |
9,739 |
(46,591) |
||||||||||||
| Net loss |
$ |
(3,762,899) |
$ |
(1,454,211) |
$ |
(6,819,349) |
$ |
(1,050,941) |
||||||||
| Comprehensive income statement: |
||||||||||||||||
| Net loss |
$ |
(3,762,899) |
$ |
(1,454,211) |
$ |
(6,819,349) |
$ |
(1,050,941) |
||||||||
| Foreign currency translation adjustment |
21,002 |
447,273 |
(732,171) |
1,633,053 |
||||||||||||
| Comprehensive (loss) income |
$ |
(3,741,897) |
$ |
(1,006,938) |
$ |
(7,551,520) |
$ |
582,112 |
||||||||
| Weighted average number of shares outstanding: |
||||||||||||||||
| Basic |
1,522,326 |
1,522,326 |
1,522,326 |
1,516,140 |
||||||||||||
| Diluted |
1,522,326 |
1,522,326 |
1,522,326 |
1,516,140 |
||||||||||||
| Losses per share: |
||||||||||||||||
| Basic |
$ |
(2.47) |
$ |
(0.96) |
$ |
(4.48) |
$ |
(0.69) |
||||||||
| Diluted |
$ |
(2.47) |
$ |
(0.96) |
$ |
(4.48) |
$ |
(0.69) |
||||||||
| QKL STORES INC. AND SUBSIDIARIES |
||||||||
| (Unaudited) |
||||||||
| Six Months Ended June 30, |
||||||||
| 2014 |
2013 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net loss |
$ |
(6,819,349) |
$ |
(1,050,941) |
||||
| Depreciation |
3,279,750 |
3,280,567 |
||||||
| Amortization |
14,708 |
16,172 |
||||||
| Share-based compensation |
204,029 |
408,234 |
||||||
| Deferred income tax |
- |
390,291 |
||||||
| Loss on disposal of fixed assets |
- |
25,646 |
||||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Accounts receivable |
222,985 |
40,727 |
||||||
| Inventories |
16,863,267 |
21,299,200 |
||||||
| Other receivables |
(314,995) |
1,669,983 |
||||||
| Prepaid expenses |
5,042,852 |
2,861,272 |
||||||
| Advances to suppliers |
2,847,162 |
7,603,073 |
||||||
| Accounts payable |
(1,367,629) |
(4,713,502) |
||||||
| Cash card and coupon liabilities |
(293,696) |
501,696 |
||||||
| Customer deposits received |
73,164 |
(117,765) |
||||||
| Accrued expenses and other payables |
447,597 |
(2,776,056) |
||||||
| Income taxes payable |
(33,029) |
20,322 |
||||||
| Net cash provided by operating activities |
20,166,816 |
29,458,919 |
||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Purchases of property, plant and equipment |
(1,603,149) |
(538,595) |
||||||
| Net cash used in investing activities |
(1,603,149) |
(538,595) |
||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Bank loan borrowing |
35,806,650 |
- |
||||||
| Bank loan repayment |
(16,275,750) |
(16,005,275) |
||||||
| Net cash provided by (used in) financing activities |
19,530,900 |
(16,005,275) |
||||||
| Effect of foreign currency translation |
(172,551) |
295,196 |
||||||
| Net increase in cash |
38,094,567 |
12,915,049 |
||||||
| Cash – beginning of period |
9,245,212 |
8,479,413 |
||||||
| Cash – end of period |
$ |
47,167,228 |
$ |
21,689,658 |
||||
| Supplemental disclosures of cash flow information: |
||||||||
| Interest paid |
$ |
2,789,480 |
$ |
523,888 |
||||
| Income taxes paid |
$ |
23,252 |
$ |
205,035 |
||||
SOURCE QKL Stores Inc.
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