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QKL Stores Inc. Announces Third Quarter 2013 Financial Results

        QKL Stores Inc. Announces Third Quarter 2013 Financial Results

-- 3Q13 Revenue decreased by 29.8% to $59.2 million from $84.3 million in
3Q12--

-- 3Q13 Gross Profit decreased by 28.4% to $10.1 million from $14.2 million in
3Q12 -

PR Newswire

DAQING, China, Nov. 14, 2013

DAQING, China, Nov. 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 third quarter
ended September 30, 2013.

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.

"We plan to open one additional store before Chinese New Year. The new stores
we will open in the future will be located in Daqing City where we have
stronger relationships with local vendors and the cost of goods is slightly
lower than the other cities in which we operate."

"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. For the remaining one quarter of
2013, we believe our gross margin will remain stable in the 17.0%-17.5% range"

"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 2013 Financial Results

Revenue in the third quarter of 2013 decreased by $25.1 million, or 29.8%, to
$59.2 million from $84.3 million for during the same quarter of 2012. Same
store sales represent sales from stores that were opened for at least one year
before the beginning of the comparison period, or by July 1, 2012. Same store
(44 stores) sales generated approximately $58.8 million sales in the third
quarter of 2013, a decrease of $7.2 million, or 12.2% compared with $67.0
million net sales in the third quarter of 2012. New store sales increased,
reflecting the net opening of one new store since July 1, 2012. The new stores
generated approximately $0.4 million sales in the third quarter of 2013.

Gross profit decreased by 28.4% year-over-year to $10.1 million, compared to
$14.2 million in the prior year period. The decrease in gross margin was
primarily attributable to net sales decrease by 25.1 million in the third
quarter of 2013. 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 $3.3 million, or 24.8%, to $10.0 million, or
16.9% of net sales, in the third quarter of 2013 from $13.3 million, or 15.8%
of net sales, in the third quarter of 2012. The change in selling expense was
mainly due to 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
September 30, 2013 compared to the same period in 2012.

General and administrative expenses decreased by $20,891, or 1.0%, to $2.1
million, or 3.5% of net sales, in the third quarter of 2013 from $2.1 million,
or 2.5% of net sales, in the third quarter of 2012. There is no significant
change to our general and administrative expense.

For the three months ended September 30, 2013, ournet loss was $1.7 million,
or $(1.112) per diluted share, comparedto net loss of $1.1 million, or
($0.842) per diluted share, for the three months ended September 30, 2012.

As of September 30, 2013, the Company had $29.6 million in unrestricted cash
and bank loans of $11.4 million, compared to $27.6 million as of September 30,
2012 with bank loans of $7.9 million.

Conference Call

Management will host a conference call at 8:30 am ET on Thursday, November
14th, 2013. To participate, please dial one of the local access numbers,
listed below. The conference call identification number is 10037060.

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:             06-800-20175

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,
                                              2013             2012
                                              (Unaudited)
ASSETS
Cash                                          $ 29,613,633     $ 8,479,413
Restricted cash                                 253              253
Accounts receivable                             794,852          796,897
Inventories                                     40,469,422       59,812,645
Other receivables                               18,101,760       18,042,360
Prepaid expenses                                9,481,373        11,083,708
Advances to suppliers                           4,776,268        9,525,250
Deferred income tax assets                      5,607,253        6,327,932
Total current assets                            108,844,814      114,068,458
Property, plant and equipment, net              42,266,831       45,439,360
Land use rights, net                            701,118          724,760
Goodwill                                        -                -
Other assets                                    12,969           12,976
Total assets                                  $ 151,825,732    $ 160,245,554
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term loans                              $ 11,379,523     $ 15,832,555
Accounts payable                                28,260,390       30,900,586
Cash card and coupon liabilities                20,871,051       18,604,188
Customer deposits received                      1,044,493        1,248,278
Accrued expenses and other payables             24,841,976       28,097,212
Income taxes payable                            23,440           2,726
Total current liabilities                       86,420,873       94,685,545
Total liabilities                               86,420,873       94,685,545
Shareholders' equity
Common stock, $0.001 par value per share,
authorized 100,000,000 shares, issued and
outstanding                                     1,522            1,444

1,522,326 and 1,443,948 shares at September
30, 2013 and December 31, 2012* respectively
Series A convertible preferred stock, par
value $0.01, authorized 10,000,000 shares,
issued and
                                                5,294            23,861
outstanding 529,412 and 2,386,110 shares at
September 30, 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                               (50,584,856)     (47,841,708)
Accumulated other comprehensive income          15,138,098       12,550,100
Total shareholders' equity                      65,404,859       65,560,009
Total liabilities and shareholders' equity    $ 151,825,732    $ 160,245,554



QKL STORES INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income


                (Unaudited)                     (Unaudited)
                Three Months                    Nine Months
                Ended September 30,             Ended September 30,
                2013            2012            2013            2012
Net sales       $ 59,243,560    $ 84,343,510    $ 215,296,669   $ 279,603,670
Cost of sales     49,118,005      70,189,152      178,397,763     231,825,748
Gross profit      10,125,555      14,154,358      36,898,906      47,777,922
Operating
expenses:
Selling           10,031,669      13,330,045      33,235,756      40,878,831
expenses
General and
administrative    2,095,044       2,074,153       6,693,516       6,539,428
expenses
Total
operating         12,126,713      15,404,198      39,929,272      47,418,259
expenses
Income (loss)
from              (2,001,158)     (1,249,840)     (3,030,366)     359,663
operations
Non-operating
expense:
Interest          190,224         111,903         645,788         216,674
income
Interest          (349,665)       (295,564)       (873,553)       (691,212)
expense
Total
non-operating     (159,441)       (183,661)       (227,765)       (474,538)
expense
Loss before       (2,160,599)     (1,433,501)     (3,258,131)     (114,875)
income taxes
Income taxes      (468,392)       (326,094)       (514,983)       152,320
Net loss        $ (1,692,207)   $ (1,107,407)   $ (2,743,148)   $ (267,195)
Comprehensive
income
statement:
Net loss        $ (1,692,207)   $ (1,107,407)   $ (2,743,148)   $ (267,195)
Foreign
currency          954,945         (25,012)        2,587,998       926,141
translation
adjustment
Comprehensive   $ (737,262)     $ (1,132,419)   $ (155,150)     $ 658,946
(loss) income
Weighted
average number
of shares
outstanding:
Basic*            1,522,326       1,315,955       1,555,978       1,314,343
Diluted*          1,522,326       1,315,955       1,555,978       1,314,343
Earnings
(losses) per
share:
Basic*          $ (1.112)       $ (0.842)       $ (1.763)       $ (0.203)
Diluted*        $ (1.112)       $ (0.842)       $ (1.763)       $ (0.203)



QKL STORES INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows


                                               (Unaudited)
                                               Nine Months
                                               Ended September 30,
                                               2013             2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                       $ (2,743,148)    $ (267,195)
Depreciation – property, plant and equipment     5,034,492        4,926,896
Amortization                                     24,361           21,672
Share-based compensation                         612,351          637,786
Deferred income tax                              880,073          7,866
Loss on disposal of fixed assets                 25,755           6,128
Adjustments to reconcile net income to net
cash provided by operating activities:
Accounts receivable                              23,117           (1,510)
Inventories                                      20,708,613       9,041,509
Other receivables                                523,424          (4,357,127)
Prepaid expenses                                 1,963,042        223,775
Advances to suppliers                            4,947,618        2,087,430
Accounts payable                                 (3,428,459)      (2,049,728)
Cash card and coupon liabilities                 1,748,812        171,689
Customer deposits received                       (234,533)        (144,596)
Accrued expenses and other payables              (3,819,724)      7,403,298
Income taxes payable                             20,408           (51,928)
Net cash provided by operating activities        26,286,202       17,655,965
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment       (787,373)        (3,648,874)
Net cash used in investing activities            (787,373)        (3,648,874)
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank loan borrowing                              11,251,270       7,902,077
Bank loan repayment                              (16,073,243)     (3,157,562)
Net cash (used in) provided by financing         (4,821,973)      4,744,515
activities
Effect of foreign currency translation           457,364          (184,433)
Net increase in cash                             21,134,220       18,567,173
Cash – beginning of period                       8,479,413        9,037,550
Cash – end of period                           $ 29,613,633     $ 27,604,723
Supplemental disclosures of cash flow
information:
Interest paid                                  $ 873,553        $ 691,212
Income taxes paid                              $ 205,905        $ 548,175

SOURCE QKL Stores Inc.

Website: http://www.qklstoresinc.com
 
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