QKL Stores Inc. Announces Second Quarter 2013 Financial Results

       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 --

PR Newswire

DAQING, China, Aug. 14, 2013

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
                                                                              June30,       December31,
                                                                              2013
                                                                                              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
Commonstock,$0.001parvaluepershare,authorized100,000,000shares,

issued and outstanding 1,522,326 and 1,443,948 shares at June 30, 2013and      1,522           1,444

December 31, 2012* respectively
SeriesAconvertiblepreferredstock,parvalue$0.01,authorized10,000,000

shares,issuedandoutstanding529,412and2,386,110sharesatJune30,2013   5,294           23,861

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                                                               (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                 Six Months
                                                                 Ended June 30,
                                    EndedJune30,
                                    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
Generalandadministrativeexpenses   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-operatingincome(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            35,711         (23,496)      (68,324)       (290,877)
(expense)
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
Comprehensiveincomestatement:
Net income (loss)                   $ (1,454,211)  $ 9,611       $ (1,050,941)  $ 840,212
Foreign currency translation          447,273        88,676        1,633,053      951,153
adjustment
Comprehensive income (loss)         $ (1,006,938)  $ 98,287      $ 582,112      $ 1,791,365
Weightedaveragenumberofshares

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
                                                                                  Ended June 30,
                                                                                  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
Adjustmentstoreconcilenetincometonetcashprovidedbyoperatingactivities:
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.

Website: http://www.qklstoresinc.com