Caixin
Nov 14, 2019 06:46 PM
BUSINESS & TECH

As Revenue Surges Sixfold, Luckin Loses Even More Money

Luckin Coffee store in Suzhou, Jiangsu province, Sept. 14. Photo: VCG
Luckin Coffee store in Suzhou, Jiangsu province, Sept. 14. Photo: VCG

Luckin Coffee Inc. reported higher-than-expected sales in the third quarter as the Chinese Starbucks rival continues to chase its goal of becoming the country’s largest coffee chain.

Its shares rose 13% on Wednesday after the company posted revenue of 1.5 billion yuan ($215.7 million), up more than sixfold from a year before. It reported a widening loss of 531.9 million yuan, 9.7% greater than a year earlier.

The Xiamen-based startup, which listed on the Nasdaq in May, has grown to become China’s No. 2 coffee chain since its establishment in October 2017. Luckin has long touted itself as a challenger to Starbucks, and has burned through cash with its rapid expansion and cut-price offers.

Luckin’s sales expenses are high due to frequent promotions in which it offers its beverages at steep discounts. In the third quarter of this year, it spent 557.7 million yuan on sales and marketing, an increase of 147.6% year-on-year.

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Luckin opened 717 new stores in the quarter, taking its total to 3,680. The company said previously that it aims to open 4,500 stores by the end of this year, which would put it past Starbucks to become the largest chain in China. Charles Lu, Luckin’s co-founder and chairman, said in an earnings call for the third-quarter report that he believes the company will hit that target.

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Starbucks had 4,125 stores across China at the end of September, according to the U.S.-based company’s earnings report. In July it opened its first Chinese store dedicated to takeout and online orders, a move seen as a response to Luckin, which only takes orders through its mobile app. Luckin operates minimalist stores that require far less space than Starbucks and are targeted mostly at takeout buyers.

Luckin began to offer more tea-based products in April, and spun off its bubble tea business in September. Tea drinks made up about one-fifth of its 1.2 billion yuan in sales of freshly brewed drinks in the third quarter.

The company said it expects its revenue to rise as high as 2.2 billion yuan in the fourth quarter.

Contact reporter Tang Ziyi (ziyitang@caixin.com)

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