QKL Stores Inc. Announces First Quarter 2014 Financial Results

        QKL Stores Inc. Announces First Quarter 2014 Financial Results  -- 1Q14 Revenue Decreased by 11.4% to $86.0 million from $97.1 million in 1Q13 --  -- 1Q14 Gross Profit Decreased by 12.0% to $14.7 million from $16.6 million in 1Q13 -  PR Newswire  DAQING, China, May 15, 2014  DAQING, China, May 15, 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 first quarter ended March 31, 2014.  Mr. Zhuangyi Wang, Chairman and CEO, said, "We opened two hypermarkets in the first quarter, and finished the first quarter operating a total of 47 stores, comprised of 27 supermarkets, 16 hypermarkets and 4 department stores. As our new store opening plan slows for 2014, the two more new stores are going to open 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 2014 Financial Results  Revenue  decreased by $11.1 million, or 11.4%, to $86.0 million for the three months ended March 31, 2014 from $97.1 million for the three months ended March 31, 2013. 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 (45 stores) sales generated approximately $81.8 million in sales in the first quarter of 2014, a decrease of $12.6 million, or 13.3% compared with $94.4 million in net sales in the first quarter of 2013. New store sales increased, reflecting the opening of two new stores since January 1, 2013. The stores generated approximately $4.2 million in sales in the first quarter of 2014. The number of stores including supermarkets/hypermarkets and department stores at March 31, 2014 was 47 versus 46 at March 31, 2013.  Gross profit decreased by $1.9 million, or 12.0%, to $14.7 million, or 17.1% of net sales, in the first quarter of 2014 from $16.6 million, or 17.1% of net sales, in the first quarter of 2013. The change in gross profit was primarily attributable to a decrease in net sales of $11.1 million in the first quarter of 2014 compared to the first 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 were $13.3 million, or 15.4% of net sales, in the first quarter of 2014, and $13.3 million, or 13.7% of net sales, in the first quarter of 2013. The change in selling expenses was immaterial in the three months ended March 31, 2014 compared to the same period in 2013.  Our net loss for the first three months of 2014 was $3.1 million, or $2.01 per diluted share, from net income of $0.4 million, or $0.27 per diluted share in the prior year period. The number of shares used in the computation of diluted EPS was 1,522,326 and 1,510,828 for the first three months of 2014 and 2013, respectively.  At March 31, 2014, we had $30.2 million of cash compared to $32.5 million at March 31, 2013.  Conference Call  The Company will conduct a conference call to discuss its first quarter 2014 results on Thursday, May 15, 2014 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    (Financial Tables on Following Pages)      QKL STORES INC. AND SUBSIDIARIES  Condensed Consolidated Balance Sheets                                                 March 31,       December 31,                                               2014             2013                                               (Unaudited) ASSETS Cash                                          $ 30,202,971     $ 9,245,212 Restricted cash                                 8,598,008        8,668,882 Accounts receivable                             313,906          557,745 Inventories                                     53,880,184       64,724,923 Other receivables                               19,562,646       21,979,152 Prepaid expenses                                6,315,204        9,915,479 Advances to suppliers                           5,589,121        7,822,660 Income taxes receivables                        1,725,573        1,739,773 Deferred income tax assets – current portion    2,765,569        2,788,918 Total current assets                            128,953,182      127,442,744 Property, plant and equipment, net              38,365,069       40,247,576 Land use rights, net                            705,134          718,337 Deferred income tax assets – non-current        66,956           66,956 portion Other assets                                    17,168           17,276 Total assets                                  $ 168,107,509    $ 168,492,889 LIABILITIES AND SHAREHOLDERS' EQUITY Short-term loans                              $ 43,799,883     $ 40,889,761 Accounts payable                                30,898,432       35,840,964 Cash card and coupon liabilities                22,634,708       18,465,030 Customer deposits received                      656,549          984,308 Accrued expenses and other payables             20,340,192       18,827,472 Total current liabilities                       118,329,764      115,007,535 Total liabilities                               118,329,764      115,007,535 Shareholders' equity Common stock, $0.001 par value per share, authorized 100,000,000 shares, issued and       1,522            1,522 outstanding 1,522,326 shares at March 31, 2014 and December 31, 2013 Series A convertible preferred stock, par value $0.01, authorized 10,000,000 shares,      5,294            5,294 issued and outstanding 529,412 shares at March 31, 2014 and December 31, 2013 Additional paid-in capital                      93,439,972       93,337,957 Retained earnings – appropriated                8,329,586        8,329,586 Retained earnings                               (65,202,245)     (62,145,794) Accumulated other comprehensive income          13,203,616       13,956,789 Total shareholders' equity                      49,777,745       53,485,354 Total liabilities and shareholders' equity    $ 168,107,509    $ 168,492,889      QKL STORES INC. AND SUBSIDIARIES  Condensed Consolidated Statements of Income                                                    (Unaudited)                                                  Three Months Ended March 31,                                                  2014            2013 Net sales                                        $ 86,032,676    $ 97,057,191 Cost of sales                                      71,300,517      80,417,743 Gross profit                                       14,732,159      16,639,448 Operating expenses: Selling expenses                                   13,280,183      13,324,213 General and administrative expenses                3,233,410       2,518,336 Total operating loss                               16,513,593      15,842,549 (Loss) income from operations                      (1,781,434)     796,899 Non-operating expense: Interest income                                    230,098         193,573 Interest expense                                   (1,499,243)     (297,608) Total non-operating loss                           (1,269,145)     (104,035) (Loss) income before income taxes                  (3,050,579)     692,864 Income taxes                                       5,872           289,594 Net  (loss) income                                 (3,056,451)     403,270 Comprehensive income statement: Net (loss) income                                  (3,056,451)     403,270 Foreign currency translation adjustment            (753,173)       1,185,780 Comprehensive (loss) income                      $ (3,809,624)   $ 1,589,050 Basic (loss) earnings per share of common stock  $ (2.01)        $ 0.27 Diluted (loss) earnings per share                $ (2.01)        $ 0.27 Weighted average shares used in calculating        1,522,326       1,476,735 (loss) earnings per common stock – basic Weighted average shares used in calculating        1,522,326       1,510,828 (loss) earnings per common stock – diluted    QKL STORES INC. AND SUBSIDIARIES  Condensed Consolidated Statements of Cash Flows                                                   (Unaudited)                                                 Three Months Ended March 31,                                                 2014            2013 CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income                               $ (3,056,451)   $ 403,270 Depreciation                                      1,646,376       1,678,164 Amortization                                      7,383           8,036 Share-based compensation                          102,014         204,117 Deferred income tax                               -               (464,414) Loss on disposal of fixed assets                  -               25,491 Adjustments to reconcile net income to net cash provided by operating activities: Accounts receivable                               241,021         429,824 Inventories                                       10,390,643      16,601,846 Other receivables                                 2,167,725       537,181 Prepaid expenses                                  3,544,791       1,776,872 Advances to suppliers                             2,185,374       6,062,785 Accounts payable                                  (4,683,343)     (5,286,996) Cash card and coupon liabilities                  4,352,101       2,683,392 Customer deposits received                        (322,039 )      1,976,833 Accrued expenses and other payables               1,423,767       (2,453,301) Income taxes payable                              (25)            85,795 Net cash provided by operating activities         17,999,337      24,268,895 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment        (81,623)        (350,987) Net cash used in investing activities             (81,623)        (350,987) CASH FLOWS FROM FINANCING ACTIVITIES: Bank loan borrowing                               3,268,054       - Net cash used in financing activities             3,268,054       - Effect of foreign currency translation            (228,009)       61,898 Net increase in cash                              21,185,768      23,917,908 Cash – beginning of period                        9,245,212       8,479,413 Cash – end of period                            $ 30,202,971    $ 32,459,219 Supplemental disclosures of cash flow information: Interest paid                                   $ 1,499,243     $ 297,608 Income taxes paid                               $ 5,847         $ 203,799  SOURCE QKL Stores Inc.  Website: http://www.qklstoresinc.com  
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