Luckin Coffee CEO says they are on track to become the largest coffee chain in China
The chain added nearly 600 locations during Q2.
Luckin Coffee had a wider-than-expected loss in its first quarterly earnings report since its trading debut in the US, amid aggressive spending for breakneck expansion and heavy discounts to rival Starbucks in China.
The company, which listed its shares in May, opened 593 new stores in the June quarter. Net loss was US$99.2 million, or 96 cents per American depositary share.
Net sales rose 648% to US$132.4m, above analysts’ expectations of US$130.3m.
For the third quarter, Luckin expects net revenues between 1.35 billion yuan (US$192.4 million) and 1.45 billion yuan.
Luckin’s store count stood at 2,963 for Q2, some 1,000 fewer than Starbucks, which recently launched its smaller ‘Now’ store format and has an existing partnership with Alibaba’s ele.me delivery platform.
“We have substantially reduced our store operating loss as a percentage of net revenues as a result of benefits of scale and increased bargaining power, operating efficiency from technology, and higher store throughput, and we are on track to reach our store level break-even point during the third quarter of 2019,” Luckin Coffee CEO Jenny Zhiya Qian said in the announcement.
The chain also launched its ‘Luckin Tea’ range in response to strong demand in the world’s second-largest economy.
“We also strengthened our supply chain and continued to invest in our brand and our technology. Finally, we remain on track to become the largest coffee network in China in terms of number of stores by the end of 2019,” Qian added.
