QKL Stores Inc. Announces Third Quarter 2015 Financial Results
-- 3Q15 Revenue decreased by 4.1% to $58.6 million from $61.1 million in 3Q14 --
-- 3Q15 Gross Profit decreased by 4.5% to $9.8 million from $10.3 million in 3Q14 --
DAQING, China, Nov. 16, 2015 /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 third quarter ended September 30, 2015.
Mr. Zhuangyi Wang, Chairman and CEO, said, "Our third quarter results generally met our levels of expectation. The variety, value and freshness of our products continue to resonate with our customers driving sales higher. This store growth was also driven by in-store promotional events such as store anniversary celebrations."
"The environment of retailing business is still challenging mainly due to the rising costs and the emerging e-commerce channel. However, we are still confident on the domestic needs because of the urbanization of the third and fourth tier cities that we will achieve a fundamental improvement in the consumer purchasing power during the process."
"We look forward to the upcoming holiday season as we have a number of exciting marketing initiatives planed. Our balance sheet is healthy with a strong cash position, low level of debt and stable flow of cash from operations. We continue to make progress with our store operations and that can result in greater sales and profits over time."
Third Quarter 2015 Financial Results
Revenue in 3rd quarter decreased by $2.5 million, or 4.1%, to $58.6 million for the three months ended September 30, 2015 from $61.1 million for the three months ended September 30, 2014. 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, 2014. Same store (42 stores) sales generated approximately $54.8 million in sales in the third quarter of 2015, a decrease of $4.4 million, or 7.4% compared with $59.2 million in net sales in the third quarter of 2014. New store sales increased, reflecting the opening of 3 new stores since January 1, 2014. These stores generated approximately $3.8 million in sales in the third quarter of 2015. The number of stores including supermarkets/hypermarkets and department stores at September 30, 2015 was 45 versus 47 at September 30, 2014.
Gross profit, or total revenue minus cost of sales, decreased by $0.5 million, or 4.5%, to $9.8 million, or 16.7% of net sales, in the third quarter of 2015 from $10.3 million, or 16.8% of net sales, in the third quarter of 2014. The change in gross profit was primarily attributable to a decrease in net sales of $2.5 million and a decrease in cost of sales of $2.0 million in the third quarter of 2015 compared to the third quarter of 2014. The decrease in gross profit relative to net sales was due to competitions arising from the increasing challenge from the online shopping that have significant pricing pressure on our selling of high margin products.
Selling expenses decreased by $2.5 million, or 19.4%, to $10.5 million, or 18.0% of net sales, in the third quarter of 2015, and $13.1 million, or 21.4% of net sales, in the third quarter of 2014. In specific, labor costs decreased by $0.3 million or 5.2%, to $5.5 million in the third quarter of 2015 from $5.8 million in the third quarter of 2014. Promotion expenses decreased by $0.3 million, or 20.0%, to $1.2 million in the third quarter of 2015 from $1.5 million in the third quarter of 2014. Utilities decreased by $0.2 million, or 11.8%, to $1.5 million in the first quarter of 2015 from $1.7 million in the third quarter of 2014. Preliminary expenses in relation to new store opening was nil and $1.5 million in the third quarter of 2015 and 2014 respectively.
General and administrative expenses decreased by $0.1 million, or 4.0%, to $2.0 million, or 3.3% of net sales, in the third quarter of 2015 from $1.9 million, or 3.3% of net sales, in the third quarter of 2014. There is no significant change to our general and administrative expense.
For the three months ended September 30, 2014, our net loss for the third quarter of 2015 was $3.8 million, or $2.53 per diluted share, from net loss of $5.5 million, or $3.60 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 third quarter of 2015 and 2014.
Conference Call
The Company will conduct a conference call to discuss its third quarter 2015 results on Monday, November 16, 2015 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 10046673.
| 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: |
4001-201203 |
| China (S) Toll Free: |
4001-201203 |
| 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 |
||||||||
| Condensed Consolidated Balance Sheets |
||||||||
| September 30, |
December 31, |
|||||||
| (Unaudited) |
||||||||
| ASSETS |
||||||||
| Cash |
$ |
18,789,468 |
$ |
9,013,006 |
||||
| Restricted cash |
20,506,868 |
8,623,748 |
||||||
| Accounts receivable |
936,843 |
949,211 |
||||||
| Inventories |
42,851,508 |
62,605,754 |
||||||
| Other receivables |
19,565,180 |
21,375,611 |
||||||
| Prepaid expenses |
11,232,673 |
12,114,028 |
||||||
| Advances to suppliers |
8,524,899 |
8,653,037 |
||||||
| Deferred income tax assets -- current portion |
2,828,440 |
2,839,714 |
||||||
| Total current assets |
125,235,879 |
126,174,109 |
||||||
| Property, plant and equipment, net |
34,335,416 |
37,843,171 |
||||||
| Land use rights, net |
637,764 |
684,375 |
||||||
| Deferred income tax assets -- non-current portion |
59,570 |
61,681 |
||||||
| Other assets |
11,886 |
11,880 |
||||||
| Total assets |
$ |
160,280,515 |
$ |
164,775,216 |
||||
| LIABILITIES AND SHAREHOLDERS' EQUITY |
||||||||
| Short-term loans |
$ |
70,712,467 |
$ |
60,201,757 |
||||
| Accounts payable |
35,689,016 |
37,206,633 |
||||||
| Cash card and coupon liabilities |
14,489,950 |
14,539,728 |
||||||
| Customer deposits received |
1,968,447 |
2,005,136 |
||||||
| Accrued expenses and other payables |
22,665,590 |
23,147,611 |
||||||
| Income taxes payable |
32,516 |
241,189 |
||||||
| Total current liabilities |
145,557,986 |
137,342,054 |
||||||
| Total liabilities |
145,557,986 |
137,342,054 |
||||||
| Shareholders' equity |
||||||||
| Common stock, $0.001 par value per share, authorized 100,000,000 shares, issued and |
1,522 |
1,522 |
||||||
| Series A convertible preferred stock, par value $0.01, authorized 10,000,000 shares, issued and |
5,294 |
5,294 |
||||||
| Additional paid-in capital |
93,746,014 |
93,746,014 |
||||||
| Retained earnings -- appropriated |
8,338,153 |
8,338,153 |
||||||
| Retained earnings |
(102,088,725) |
(89,116,190) |
||||||
| Accumulated other comprehensive income |
14,720,271 |
14,458,369 |
||||||
| Total shareholders' equity |
14,722,529 |
27,433,162 |
||||||
| Total liabilities and shareholders' equity |
$ |
160,280,515 |
$ |
164,775,216 |
||||
| QKL STORES INC. AND SUBSIDIARIES |
||||||||||||||||
| Condensed Consolidated Statements of Income |
||||||||||||||||
| (Unaudited) |
(Unaudited) |
|||||||||||||||
| Three Months |
Nine Months |
|||||||||||||||
| 2015 |
2014 |
2015 |
2014 |
|||||||||||||
| Net sales |
$ |
58,624,419 |
$ |
61,121,016 |
$ |
207,615,214 |
$ |
198,809,303 |
||||||||
| Cost of sales |
48,825,220 |
50,855,098 |
173,493,113 |
165,124,579 |
||||||||||||
| Gross profit |
9,799,199 |
10,265,918 |
34,122,101 |
33,684,724 |
||||||||||||
| Operating expenses: |
||||||||||||||||
| Selling expenses |
10,523,974 |
13,062,967 |
37,361,946 |
35,800,120 |
||||||||||||
| General and administrative expenses |
1,940,631 |
2,022,426 |
6,492,514 |
7,219,674 |
||||||||||||
| Total operating expenses |
12,464,605 |
15,085,393 |
43,854,460 |
43,019,794 |
||||||||||||
| Loss from operations |
(2,665,406) |
(4,819,475) |
(9,732,359) |
(9,335,070) |
||||||||||||
| Non-operating expense: |
||||||||||||||||
| Interest income |
250,179 |
241,800 |
540,008 |
726,416 |
||||||||||||
| Interest expense |
(1,432,582) |
(891,855) |
(3,760,497) |
(3,670,486) |
||||||||||||
| Total non-operating expense |
(1,182,403) |
(650,055) |
(3,220,489) |
(2,944,070) |
||||||||||||
| Loss before income taxes |
(3,847,809) |
(5,469,530) |
(12,952,848) |
(12,279,140) |
||||||||||||
| Income taxes |
656 |
11,357 |
19,687 |
21,096 |
||||||||||||
| Net loss |
$ |
(3,848,465) |
$ |
(5,480,887) |
$ |
(12,972,535) |
$ |
(12,300,236) |
||||||||
| Comprehensive income statement: |
||||||||||||||||
| Net loss |
$ |
(3,848,465) |
$ |
(5,480,887) |
$ |
(12,972,535) |
$ |
(12,300,236) |
||||||||
| Foreign currency translation adjustment |
(335,070) |
675,064 |
261,902 |
(57,107) |
||||||||||||
| Comprehensive loss |
$ |
(4,183,535) |
$ |
(4,805,823) |
$ |
(12,710,633) |
$ |
(12,357,343 |
||||||||
| Weighted average number of shares outstanding: |
||||||||||||||||
| Basic |
1,522,326 |
1,522,326 |
1,522,326 |
1,522,326 |
||||||||||||
| Diluted |
1,522,326 |
1,522,326 |
1,522,326 |
1,522,326 |
||||||||||||
| Losses per share: |
||||||||||||||||
| Basic |
$ |
(2.53) |
$ |
(3.60) |
$ |
(8.52) |
$ |
(8.08) |
||||||||
| Diluted |
$ |
(2.53) |
$ |
(3.60) |
$ |
(8.52) |
$ |
(8.08) |
||||||||
| QKL STORES INC. AND SUBSIDIARIES |
||||||||
| Condensed Consolidated Statements of Cash Flows |
||||||||
| (Unaudited) |
||||||||
| Nine Months Ended September 30, |
||||||||
| 2015 |
2014 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net loss |
$ |
(12,972,535) |
$ |
(12,300,236) |
||||
| Depreciation |
3,023,678 |
5,084,837 |
||||||
| Amortization |
23,903 |
24,173 |
||||||
| Share-based compensation |
- |
306,309 |
||||||
| Deferred income tax |
(88,564) |
(8,770) |
||||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Accounts receivable |
(20,739) |
233,589 |
||||||
| Inventories |
18,546,323 |
16,845,228 |
||||||
| Other receivables |
1,111,685 |
2,599,829 |
||||||
| Prepaid expenses |
481,141 |
2,916,696 |
||||||
| Advances to suppliers |
(173,189) |
2,829,497 |
||||||
| Accounts payable |
(251,754) |
(1,606,320) |
||||||
| Cash card and coupon liabilities |
461,646 |
(293,403) |
||||||
| Customer deposits received |
32,921 |
212 |
||||||
| Accrued expenses and other payables |
319,512 |
211,765 |
||||||
| Income taxes payable |
(206,596) |
32,248 |
||||||
| Net cash provided by operating activities |
10,287,432 |
16,875,654 |
||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Purchases of property, plant and equipment |
(742,895) |
(3,229,057) |
||||||
| Increase of restricted cash |
(12,553,657) |
- |
||||||
| Net cash used in investing activities |
(13,296,552) |
(3,229,057) |
||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Repayment of bank borrowings |
(71,758,322) |
(16,259,555) |
||||||
| Bank loan borrowing |
84,716,935 |
35,771,021 |
||||||
| Net cash provided by financing activities |
12,958,613 |
19,511,466 |
||||||
| Effect of foreign currency translation |
(173,031) |
202,404 |
||||||
| Net increase in cash |
9,949,493 |
33,360,467 |
||||||
| Cash -- beginning of period |
9,013,006 |
9,245,212 |
||||||
| Cash -- end of period |
$ |
18,789,468 |
$ |
42,605,679 |
||||
| Supplemental disclosures of cash flow information: |
||||||||
| Interest paid |
$ |
3,760,497 |
$ |
3,670,486 |
||||
| Income taxes paid |
$ |
228,360 |
$ |
65,184 |
||||
SOURCE QKL Stores Inc.
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