QKL Stores Inc. Announces Third Quarter 2014 Financial Results

-- 3Q14 Revenue increased by 3.2% to $61.1 million from $59.2 million in 3Q13 --
-- 3Q14 Gross Profit increased by 1.4% to $10.3 million from $10.1 million in 3Q13 -

DAQING, China, Nov. 13, 2014 -- QKL Stores Inc. (the "Company") (QKLS), a leading regional supermarket chain in Northeastern China and Inner Mongolia, today announced its financial results for the third quarter ended September 30, 2014.

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 two stores before year end. 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 retailing business environment is still challenging, mainly due to rising costs and emerging e-commerce channels. However, we are still confident in domestic needs; because of the urbanization of third- and fourth-tier cities we will achieve a fundamental improvement in consumer purchasing power during the process.

"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 2014 increased by $1.9 million, or 3.2%, to $61.1 million for the three months ended September 30, 2014 from $59.2 million for the three months ended September 30, 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 (44 stores) sales generated approximately $56.2 million in sales in the third quarter of 2014, a decrease of $1.5 million, or 2.6%, compared with $57.7 million in net sales in the third quarter of 2013. New store sales increased, reflecting the opening of three new stores since January 1, 2013. These stores generated approximately $4.3 million in sales in the third quarter of 2014. The number of stores including supermarkets/hypermarkets and department stores at September 30, 2014 was 47 versus 45 at September 30, 2013.

Gross profit increased by $0.1 million, or 1.4%, to $10.3 million, or 16.8% of net sales, in the third quarter of 2014 from $10.1 million, or 17.1% of net sales, in the third quarter of 2013. The change in gross profit was primarily attributable to an increase in net sales of $1.9 million and an increase in cost of sales of $1.7 million in the third quarter of 2014 compared to the third quarter of 2013.

Selling expenses increased by $3.0 million, or 30.2%, to $13.1 million, or 21.4% of net sales, in the third quarter of 2014, from $10.0 million, or 16.9% of net sales, in the third quarter of 2013. The increase in selling expenses relative to net sales was due to the realizing of significant preliminary expenses of new stores opening of $1.8 million in the three months ended September 30, 2014 compared to nil in the same period in 2013.

General and administrative expenses decreased by $0.1 million, or 3.5%, to $2.0 million, or 3.3% of net sales, in the third quarter of 2014 from $2.1 million, or 3.5% of net sales, in the third quarter of 2013.  There is no significant change to our general and administrative expense.

For the three months ended September 30, 2014, our net loss was $5.5 million, or $(3.60) per diluted share, compared to net loss of $1.7 million, or ($1.11) per diluted share, for the three months ended September 30, 2013. The number of shares used in the computation of diluted EPS was 1,522,326 for the third quarter of 2014 and 2013. 

Conference Call

Management will host a conference call at 8:30 am ET on Friday, November 14th. To participate, please dial one of the local access numbers, listed below. The conference call identification number is 10017432.

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