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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