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Chinese Retailer Poised for Expansion

Stocks in this article: QKLS

"I love to build things," Stewart said. "I have one more journey left at my age, and QKL Stores is it." When I asked how, in his opinion, QKL stacked up versus the other business building opportunities he had tackled over his career, his answer was direct and powerful, it's the "biggest opportunity I have ever been involved with."

At a run rate of over $21 million a month, sales are up 300% in two years. A recent $35 million financing in the fourth quarter of 2009 added needed expansion capital. Although investors (myself included) got a lump in our throats when, in January, it announced it had spent $10 million on a new headquarters building, I will tell you that although it may have paid top dollar for the property, the rationale was sound.

The current headquarters simply doesn't have the space. In fact, the overcrowding at the headquarters is direct result of the past two years' growth. As we walked through the current headquarters with Stewart on our way to visit the new headquarters building, he showed me the purchasing department, which was so crowded it had three employees to a desk, in three shifts, around the clock.

QKL's goal is to hit 200 stores by the end of 2014. In order to do this, it expects to expand its workforce from 4,200 employees to over 22,000 employees. QKL believes in a bottoms-up approach to its workforce. Each person hired is put through a rigorous education and training program.

After our brief stop to look at the new headquarters (the expected move-in date is in the middle of the second quarter, we drove two hours south to the city of Harbin. Strategically located, Harbin has been in the cross-roads of trade throughout this region for centuries. In fact, the famous Trans-Siberian railroad, which winds 5,200 miles from Moscow to Vladivostok , branches off through Harbin as it makes its way to Beijing. Here at this most important point, QKL is putting the finishing touches on its massive distribution center.

With over 200,000 square feet of storage space, this facility is more than capable of taking care of the 200 stores it expects to have in place within the next four years. According to Stewart, everything is in place for the QKL to mushroom into the dominant player in this region of 150 million people (almost one-half the population size of the U.S.) The only thing that keeps him up at night is "execution, and I think we are 80% there," he said. I believe him.

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