By a News Reporter-Staff News Editor at China Weekly News -- QKL Stores Inc. (the "Company") (Nasdaq: QKLS), a leading regional supermarket chain in Northeastern China and Inner Mongolia, announced its financial results for the second quarter ended June 30, 2014.
Mr. Zhuangyi Wang, Chairman and CEO, said, "The second quarter was a period in which we focused on improving efficiency in our business. Our existing stores opened for more than a year continued to show stable gross profit margin of 16.8% which helps support the ramp up period of our newer stores, which typically take longer to reach profitability.
"We plan to open 2 additional stores this year. These two new stores we will open in the future will be located in the Heilongjiang Province where we have stronger relationships with local vendors and the cost of goods is slightly lower than the other two provinces (Liaoning and Jilin) in which we operate."
"As QKL expands its market presence in northeast China, we are uniquely positioned against our local competitors through our large product offering, strong supplier relationships, efficient distribution network and state-of-the-art IT system. We are comfortable with our opportunities in the second half of the year and believe we'll see an improvement in operating expenses and net result from the current quarter."
Second Quarter 2014 Financial Results
Net Sales -Net sales decreased by $7.3 million, or 12.4%, to $51.7 million for the three months ended June 30, 2014 from $59.0 million for the three months ended June 30, 2013. The change in net sales was primarily attributable to the following: 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 $49.6 million in sales in the second quarter of 2014, a decrease of $3.8 million, or 7.1% compared with $53.4 million in net sales in the second quarter of 2013. New store sales increased, reflecting the opening of two new stores since January 1, 2013. These stores generated approximately $2.1 million in sales in the second quarter of 2014. The number of stores including supermarkets/hypermarkets and department stores at June 30, 2014 was 46 versus 45 at June 30, 2013.
Gross profit, or total revenue minus cost of sales, decreased by $1.4 million, or 14.3%, to $8.7 million, or 16.8% of net sales, in the second quarter of 2014 from $10.1 million, or 17.2% of net sales, in the second quarter of 2013. The change in gross profit was primarily attributable to a decrease in net sales of $7.3 million and a decrease in cost of sales of $5.9 million in the second quarter of 2014 compared to the second 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 decreased by $0.4 million, or 4.3%, to $9.5 million, or 18.3% of net sales, in the second quarter of 2014, and $9.9 million, or 16.7% of net sales, in the second quarter of 2013. The increase in selling expenses relative to net sales was due to the significant decrease in net sales in the three months ended June 30, 2014 compared to the same period in 2013.
General and administrative expenses decreased by $0.1 million, or 5.6%, to $2.0 million, or 3.8% of net sales, in the second quarter of 2014 from $2.1 million, or 3.5% of net sales, in the second quarter of 2013. There is no significant change to our general and administrative expense.
Our net loss for the second quarter of 2014 was $3.8 million, or $2.47 per diluted share, from net loss of $1.5 million, or $0.96 per diluted share in the prior year period. The number of shares used in the computation of diluted EPS was 1,522,326 for the second quarter of 2014 and 2013.
Keywords for this news article include: Asia, China, QKL Stores Inc.
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