QKL Stores Inc. Announces First Quarter 2013 Financial Results

        QKL Stores Inc. Announces First Quarter 2013 Financial Results

-- 1Q13 Revenue Decreased 13.4% to $97.1 million from $112.0 million in 1Q12
--

-- 1Q13 Gross Profit Decreased 12.7% to $16.6 million from $19.1 million in
1Q12 --

PR Newswire

DAQING, China, May 14, 2013

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.

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



(Financial Tables on Following Pages)



QKL STORES INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
                                              March 31,      December 31,
                                              2013            2012
                                              (Unaudited)
ASSETS
Cash                                          $ 32,459,219    $ 8,479,413
Restricted cash                                 253             253
Accounts receivable                             371,160         796,897
Inventories                                     43,528,151      59,812,645
Other receivables                               17,706,392      18,042,360
Prepaid expenses                                9,366,871       11,083,708
Advances to suppliers                           3,510,707       9,525,250
Deferred income tax assets                      6,827,412       6,327,932
Total current assets                            113,770,165     114,068,458
Property, plant and equipment, net              44,336,463      45,439,360
Land use rights, net                            719,526         724,760
Goodwill                                        -               -
Other assets                                    12,751          12,976
Total assets                                  $ 158,838,905   $ 160,245,554
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term loans                              $ 15,919,511    $ 15,832,555
Accounts payable                                25,779,751      30,900,586
Cash card and coupon liabilities                21,391,561      18,604,188
Customer deposits received                      3,233,295       1,248,278
Accrued expenses and other payables             25,277,134      28,097,212
Income taxes payable                            88,594          2,726
Total current liabilities                       91,689,846      94,685,545
Total liabilities                               91,689,846      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      1,522           1,444
at March 31, 2013 and December 31, 2012*
respectively
Series A convertible preferred stock, par
value $0.01, authorized 10,000,000 shares,
issued and outstanding 529,412 and 2,386,110    5,294           23,861
shares at March 31, 2013 and December 31,
2012 respectively
Additional paid-in capital                      92,521,489      92,503,000
Retained earnings – appropriated                8,323,312       8,323,312
Retained earnings                               (47,438,438)    (47,841,708)
Accumulated other comprehensive income          13,735,880      12,550,100
Total shareholders' equity                      67,149,059      65,560,009
Total liabilities and shareholders' equity    $ 158,838,905   $ 160,245,554
*The number of shares of common stock has been retroactively restated to
reflect the 1-for-8 Reverse Stock Split effected on February 4, 2013.



QKL STORES INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
                                                  (Unaudited)
                                                  Three Months Ended March 31,
                                                  2013          2012
Net sales                                         $ 97,057,191  $ 112,038,616
Cost of sales                                       80,417,743    92,983,490
Gross profit                                        16,639,448    19,055,126
Operating expenses:
Selling expenses                                    13,324,213    15,130,888
General and administrative expenses                 2,518,336     2,375,774
Total operating expenses                            15,842,549    17,506,662
Income from operations                              796,899       1,548,464
Non-operating expense:
Interest income                                     193,573       26,528
Interest expense                                    (297,608)     (293,909)
Total non-operating loss                            (104,035)     (267,381)
Income before income taxes                          692,864       1,281,083
Income taxes                                        289,594       450,482
Net  income                                         403,270       830,601
Comprehensive income statement:
Net income                                          403,270       830,601
Foreign currency translation adjustment             1,185,780     862,477
Comprehensive income                              $ 1,589,050   $ 1,693,078
Basic earnings per share of common stock          $ 0.27        $ 0.54
Diluted earnings per share                        $ 0.27        $ 0.54
Weighted average shares used in calculating net     1,476,735     1,306,025
income per ordinary share-- basic
Weighted average shares used in calculating net     1,510,828     1,543,297
income per ordinary share-- diluted
See notes to unaudited condensed consolidated financial statements.





QKL STORES INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
                                                 (Unaudited)
                                                 Three Months Ended March 31,
                                                 2013           2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                       $ 403,270      $ 830,601
Depreciation                                       1,678,164      1,641,431
Amortization                                       8,036          7,224
Share-based compensation                           204,117        216,158
Deferred income tax                                (464,414)      304,196
Loss on disposal of fixed assets                   25,491         6,137
Adjustments to reconcile net income to net cash
provided by operating activities:
Accounts receivable                                429,824        11,978
Inventories                                        16,601,846     12,704,657
Other receivables                                  537,181        3,504,787
Prepaid expenses                                   1,776,872      1,229,951
Advances to suppliers                              6,062,785      2,306,768
Accounts payable                                   (5,286,996)    (696,663)
Cash card and coupon liabilities                   2,683,392      1,257,931
Customer deposits received                         1,976,833      (415,828)
Accrued expenses and other payables                (2,453,301)    6,507,064
Income taxes payable                               85,795         (8,580)
Net cash provided by operating activities          24,268,895     29,407,812
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment         (350,987)      (827,585)
Decrease of restricted cash                        -              -
Net cash used in investing activities              (350,987)      (827,585)
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank loan repayment                                -              (1,581,103)
Net cash used in financing activities              -              (1,581,103)
Effect of foreign currency translation             61,898         41,588
Net increase in cash                               23,917,908     26,999,124
Cash-- beginning of period                        8,479,413      9,037,550
Cash --end of period                            $ 32,459,219   $ 36,078,262
Supplemental disclosures of cash flow
information:
Interest paid                                    $ 297,608      $ 293,909
Income taxes paid                                $ 203,799      $ 459,062



SOURCE QKL Stores Inc.

Website: http://www.qklstoresinc.com
 
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