| China

Luckin Coffee seeks to break even in 2020 as rapid expansion continues

Second quarter results show further losses for Luckin Coffee, but revenues increase seven-fold as upstart chain doubles down on discounted coffee strategy

A Luckin Coffee promotional video. The chain has sought to harness burgeoning demand for coffee concepts among China's younger consumers with app-based ordering, delivery and discount promotions

Luckin Coffee has announced total net product revenues of ¥870m ($126.7m) for the second 2019 quarter, a near seven-fold increase on the ¥109 reported for the same period in 2018. However, the chain experienced further second quarter net loss of $99.2m, an increase on the $85.3m first quarter loss.

In a press statement, Luckin CEO Zhiya Qian hailed a rise in the number of cumulative customers to 22.8 million, with 5.9 million new transacting customers added in 2019.” We believe this is the result of our distinguished value proposition of delivering our customers high quality, high convenience and high affordability,” she said.

However, appearing to acknowledge some investor trepidation on Luckin’s widening losses, CFO Reinout Schakel told Reuters shareholders expect Luckin to break-even somewhere towards the end of 2020. “Our shareholders want us to focus on revenue growth and store level profitability,” he added.

Nevertheless, the domestic chain continued its breakneck store expansion in the Chinese market, adding 593 stores during the period to operate a total of 2,963 stores. Luckin plans to operate, 4,500 stores by the end of 2019, a goal which if reached would see the chain surpass Starbucks as the largest coffee chain by store numbers in China.

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