DAQING, China, May 17 /PRNewswire-Asia/ -- QKL Stores Inc. (the "Company") (Nasdaq:QKLS - News), a leading regional supermarket chain in Northeastern China, today announced its financial results for the quarter ended March 31, 2010.
Mr. Zhuangyi Wang, Chairman and CEO, said, "We are pleased to announce solid first quarter 2010 financial results, with revenue increasing by 23% on a year over year basis. During the first quarter, we opened two new supermarkets for an aggregate of 11,000 sq. meters, which reflected our efforts to open larger stores that can accommodate a greater assortment of grocery, fresh food and non-food items."
"We continue to make excellent progress building out our infrastructure to enhance overall scalability. We officially commenced operations in our new distribution center in Harbin, Heilongjiang, near the end of April. The new distribution center is integral to our expansion strategy as it enables us to expand the sourcing of products and fresh produce directly from manufacturers and farmers and to increase our private label offerings, which in turn contribute to reduced costs, increased profit margin and greater value for our customers."
First Quarter 2010 Financial Results
Revenue in the first quarter of 2010 increased 22.6% to $82.3 million from $67.1 million in the first quarter of 2009. Revenue performance reflected the growth of 28 comparable stores, which are stores that have been open for at least one year, as well as sales from the opening of 7 new stores since January 1, 2009. Same-store sales were approximately $68.7 million in the first quarter of 2010, an increase of 9.2% from $62.9 millionin the first quarter of 2009.
Gross profit increased 22.9% year over year to $14.5 million from $11.8 million in the prior year period. Gross margin increased to 17.7% from 17.5% in the year ago period due to the increase in sales in the 2010 first quarter. The Company continues to believe that gross margin will be in the range of 17%-19% over the next few quarters.
Operating income increased 7.7% to $5.5 million from $5.1 million in the first quarter of 2009. Selling expenses increased 32.7% to $6.9 million, or 8.3% of total revenue, from $5.2 million, or 7.7% of total revenue, in the prior year period, as a result of increased salary, depreciation and rent expense commensurate with the Company's expansion.
General and administrative expenses increased 46.5% to $2.2 million, or 2.7% of total revenue, from $1.5 million, or 2.2% of total revenue, in the prior year period, primarily due to a non-cash stock compensation charge of approximately $0.6 million recognized in the first quarter of 2010.
Net income for the first quarter of 2010 increased to $11.9 million, or $0.29 per diluted share, from $4.0 million, or $0.13 per diluted share in the first quarter of 2009. Excluding changes in the fair value of warrants for the 2010 and 2009 first quarter periods, adjusted net income for the first quarter of 2010 increased 10.8% to $4.1 million, or $0.10 per diluted share, from $3.7 million, or $0.12 per diluted share, in the prior year period. The number of shares used in the computation of diluted EPS increased 34.7% to 40.4 million shares and 30.0 million shares, respectively.
As of March 31, 2010, the Company had $46.5 million in unrestricted cash, compared to $45.9 million as ofDecember 31, 2009, and no debt or bank loans.
Retail Store Update
As previously announced, the Company opened two stores in the first quarter of 2010, compared to none in the first quarter of 2009. Its 35th supermarket, opened on March 24th, 2010, is located in Tangyuan, Heilongjiang, and has floor space of approximately 6,200 square meters. The Company's 36th supermarket, opened onMarch 31, 2010, is located in Daqing, Heilongjiang and has floor space of approximately 2,655 square meters. Both stores carry items in all three of the Company's core product categories.
Mr. Wang continued, "Our store opening plan, which targets opening 20 locations and a minimum total of 100,000 sq. meters of new store space in 2010, remains on track and should accelerate as we move into the second half of this year. We are confident that our strategic operational initiatives and store growth plan can expand our position as a leading chain in northeast China."
"We remain quite excited about the future prospects for our company. We have a highly capable management team, a sound balance sheet, and a profitable enterprise with strong top-line revenue growth. We have a solid retail growth plan and uniquely differentiated product offering which provide us with a strong foundation to leverage a growing market opportunity and enhance our future growth. We have the capability to establish QKL Stores as the leading supermarket chain in northeast China."
Conference Call
The Company will conduct a conference call to discuss its first quarter 2010 results on Monday, May 17, 2010at 8:30am ET. Listeners may access the call by dialing 1-719-457-2640. To listen to the live webcast of the event, please go to http://www.viavid.net . Listeners may access the call replay, which will be available throughMay 31st, by dialing 1-719-457-0820; conference ID: 4421589.
About QKL Stores Inc.:
Based in Daqing, China, QKL Stores, Inc. is a leading regional supermarket chain company operating inNortheast China. 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: http://www.qklstoresinc.... .
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.
