QKL Stores Inc · OTC:QKLS
QKL Stores — Q3 2011 Earnings Presentation
31 slides from QKL Stores's earnings presentation, November 2011
Slide 1: QKL Stores Inc. Investor Presentation
QKL Stores Inc. Investor Presentation November 2011
Slide 2: Safe Harbor Statement
Safe Harbor Statement Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Any statements set forth above that are not historical facts are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in
Slide 3: Investment Highlights
Investment Highlights Leading chain of supermarkets/hypermarkets in Northeastern China Untapped, high growth opportunity in underdeveloped market Large addressable market in 2nd and 3rd tier cities Robust same store sales growth with remarkable fresh food section Strong Financials and healthy cash f
Slide 4: Corporate Overview
Corporate Overview Leading Supermarket Chain in Northeastern China Robust Growth in Profitable Market Ø Founded in 1998, based in Daqing, 350 ($MM) 298.4 Heilongjiang Province, the “Oil Capital” 300 247.6 of China 250 200 160.1 Ø 33 supermarkets, 16 hypermarkets, 4 150 92.0 82.1 100 9.6*** 64.9 depa
Slide 5: Market Opportunity
Market Opportunity 5
Slide 6: Retail Atmosphere in China
Retail Atmosphere in China The Retail Sales of Consumer Goods in the PRC, 2004 - 2013 (estimate) $3,000 $2,807 $2,478 $2,179 $2,000 $1,917 $1,713 $1,562 $1,173 $958 $1,000 $820 $719 $0 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 2013E China is expected to become the second largest retail market
Slide 7: Attractive Retail Market
Attractive Retail Market Growth Outpaces Rest of China Untapped Modern Retail Market Ø Population of 130+ million Ø 230 small and medium-sized city Ø 2003 “Plan for Revitalizing Northeast China” locations with limited exposure to large GDP growth higher than national average since domestic and forei
Slide 8: Attractive Retail Market
Attractive Retail Market From Farmer’s Market… …to Modern Retail 8
Slide 9: Company Profile: Timeline
Company profile: Timeline 1998 2004 2007 2008 2010 30 stores; 43 stores; 19 stores; 1st store opened in 10 stores; Public on OTC; NASDAQ Listing in Daqing, Heilongjiang Launched private 4Q09; Raised $39.7 Province, China Joined IGA label products Finished $15.5 MM MM in public offering PIPE financin
Slide 10: Company Profile
Company Profile Ø As of September 30th, 2011, we operated 33 supermarkets, 16 hypermarkets, 4 department stores and 2 distribution centers in northeastern China and Inner Mongolia Ø Our stores sell a broad selection of merchandise, including fresh food, grocery and non- food Ø Total gross area of st
Slide 11: Company Profile - Store Prototype
Company Profile - Store Prototype Store Prototype Supermarkets Hypermarkets Sales Mix Grocery 40% 38% Fresh 45% 40% Non-food 15% 22% Merchandise Assortment Up to 15,000 SKUs Up to 30,000 SKUs Demographics Middle/class Middle to upper middle class Initial investment Per Sq. Meter ￥2,000 ($28.42 per s
Slide 12: Company Profile - Robust Same Store Sales
Company Profile - Robust Same Store Sales Revenue Growth Drivers Gross Profit Drivers Ø Marketing initiatives Ø Increased Non Food variety at higher margins § Loss leader promotional offers § Weekly Advertised Mailers Ø Resource buying direct from farmers for fruits, vegetables and fish. Ø Establish
Slide 13: Company Profile - Operating Philosophy
Company Profile - Operating Philosophy Store Organization Ø Product divided into fresh food, grocery and non-food Ø Food localization caters to local demand and drives fresh food sales Ø Consumer education signage Service and Training Ø QKLS management training school Ø 5 and 10 year service recogni
Slide 14: Company Profile - Distribution Centers
Company Profile - Distribution Centers Current Distribution Centers Ø Fresh DC with daily delivery in Daqing Ø Grocery & non-food DC in Daqing New Distribution Center Ø 19,600 sq. mtr. (210,973 sq. ft.) facility in Harbin - centrally located near our stores Ø Commenced operations in 2Q10 Ø Ability t
Slide 15: Company Profile - Information Technology
Company Profile - Information Technology Distinctive Logistics Capabilities Ø Logistics center in Daqing Ø Manhattan WMS § Used by 60 of the world’s 250 largest retail companies § Wal-Mart, Home Depot, Target, Costco, Kroger, Sears Ø V.O.I.P telephone Ø Real time video conferencing Ø Warehouse Manag
Slide 16: Company Profile: Independent Grocery Alliance
Company Profile: Independent Grocery Alliance Leverage IGA System Ø We are the first member of the IGA in northeastern China Ø Access to IGA global purchasing network Ø Access to shared education system with other IGA retailers in China Ø Reduced supply costs for popular products such as: § Coca Col
Slide 17: Company Profile: Advertising and Marketing
Company Profile: Advertising and Marketing Advertising Ø In store promotions Ø Lost leader promotions attract customer traffic Ø Bi-monthly QKL mailer, weekly mailer and three day special mailer Ø Theme promotions Membership Cards Ø Members receive product discounts Ø Complete customer information c
Slide 18: Company Profile: Promotion Activities
Company Profile: Promotion Activities Prepaid Buying Cards Ø 16% of current sales Ø Corporate promotional items Ø Gifts during Chinese holiday seasons Ø 2% discount for RMB 3,000 purchases Promotional Signs Ø Inform customer and create image of customer value § Advertised special § Clearance product
Slide 19: Company Profile: Private Label
Company Profile: Private Label Ø Merchandise made to our specifications by manufacturers, using a QKL name Ø Includes 600 SKUs grocery and non-food items Ø Same quality but 10% cheaper than brand merchandise Ø Profit margins higher than profit margins for other grocery items Ø Represented 5.8%, 5.5%
Slide 20: Company Profile: Growth Strategy
Company Profile: Growth Strategy Increase Market Increase Private Share in Existing Label Sales Markets Expand Develop Geographical Distribution Coverage within Network Northeastern China Continue to Diversify into Pursue Strategic Department Acquisitions Stores 20
Slide 21: Company Profile: Competitive Advantages
Company Profile: Competitive Advantages Vs. Domestic Competitors Vs. International Competitors Ø High quality products at lower cost, the breadth Ø Unique market positioning of products we carry, and deep knowledge of our customers Ø Familiarity with local Chinese culture and understanding of consum
Slide 22: Financial Performance
Financial Performance 22
Slide 23: Robust Top Line Growth
Robust Top Line Growth 350 ($MM) Revenue(＄MM) 298.4 300 247.6 250 200 160.1 150 100 92.0 82.1 75.0 64.9 50 0 2006 2007 2008 2009 2010 3Q10 3Q11 Revenue(＄MM) 23
Slide 24: Gross Profit / Margin Performance
Gross Profit / Margin Performance 60 25.0% ($MM) 20.3% 50 19.1% 19.0%* 20.0% 17.7% 17.4% 17.3% 16.5%* 40 15.0% 30 52.9 10.0% 20 41.0 30.4 5.0% 10 18.8 14.3 14.2 11.3 0 0.0% 2006 2007 2008 2009 2010 3Q10 3Q11 Gross Profit Gross Margin % *Reflects reclassification of certain items which impacted reven
Slide 25: Healthy Operating Trend – Adjusted EBITDA
Healthy Operating Trend – Adjusted EBITDA $20 ($MM) $18 17.2 17.2 $16 14.3 $14 $12 10.4 $10 $8 7.6 $6 $4 2.8 $2 1.1 $0 2006 2007 2008 2009 2010 3Q10 3Q11 Adjusted EBITDA Adjusted EBITDA represents net income before depreciation, amortization, change in fair value of warrants, interest income, intere
Slide 26: Income Statement
Income Statement ($MM, except for EPS) Three Months Ended September 30 2010 2011 Net Revenues 64.9 82.1 Cost of Sales (53.6) (67.9) Gross Profit /Gross Margin 11.3/17.4% 14.2/17.3% Operating Expenses (9.9) (15.4) Income from Operations /Operating Margin 1.4/2.1% (1.2)/NA Income Taxes (0.5) 0.2 Net I
Slide 27: Balance Sheet and Cash Flow Highlights
Balance Sheet and Cash Flow Highlights Key Balance Sheet Items ($MM) As of Dec. 31, 2010 Sep. 30, 2011 Cash 17.5 28.0 Total Current Assets 99.7 92.6 Total Assets 169.6 182.1 Current Liabilities 63.5 70.3 Debt 0.0 0.0 Total Liabilities 63.5 70.3 Shareholders Equity 106.1 111.8 Key Cash Flow Items ($M
Slide 28: Experienced and Proven Management
Experienced and Proven Management Name Experience Ø Founder, Chairman, and CEO since inception in 1998 Zhuangyi Wang Ø 20 years wholesale and retail experience in northeast China Founder, Chairman, CEO Ø Bachelors from Heilongjiang Radio & TV University; EMBA form Tsinghua University Ø A member of C
Slide 29: Investment Highlights
Investment Highlights Leading chain of supermarkets/hypermarkets in Northeastern China Untapped, high growth opportunity in underdeveloped market Large addressable market in 2nd and 3rd tier cities Robust same store sales growth with remarkable fresh food section Strong Financials and healthy cash f
Slide 30: Equity Snapshot
Equity Snapshot NASDAQ: QKLS Price (11/14/11) $1.01 Shares Outstanding (as of 9/30/11) 31.3 MM Market Cap. $31.7 MM Enterprise Value $6.86 MM Cash (as of 9/30/11) $28.0 MM Debt (as of 9/30/11) $0.0 MM Revenue (3Q11) $82.1 MM Net Loss (3Q11) $(0.8) MM Diluted EPS (3Q11) $(0.03) 30
Slide 31: Contact Information
Contact Information QKL Stores Inc. Investor Relations – ICR, Inc. Mr. Mike Li Mr. Bill Zima IR manager ICR, Inc. 4 Nanreyuan St., Dongfeng Xincun Tel: +1-203-682-8233 Daqing City, 163311 China Email: Bill.zima@icrinc.com Tel: (86)459 4607987 Email: mike.li@qkl.cn QKLS Investor Relations Department