| China

Luckin Coffee narrows losses as third quarter revenues rise

Continued store expansion sees operational costs rise to 2.13bn yuan (US$298.3m) during the third quarter, nearly three times higher than for the same period in 2018 –​ but losses decrease

Luckin forecasts revenues of 2.1bn-2.2bn yuan ($300m-$314m) for the fourth quarter 2019 | Photo: Luckin Coffee 


 

Luckin Coffee is making progress in its goal to break even during 2020. The rapidly expanding Chinese coffee chain achieved revenues of 1.54bn yuan ($US215.7) in the three months to 30 September, a six-fold increase compared to the same period in 2018.

Luckin Coffee incurred losses of of 531.9m yuan (US$74.4m) during the period. However, operating expenses as a percentage of net revenues decreased to 138.3% in the third quarter of 2019, down from 301.7% during 2018.

Menu diversification appears to be having a positive effect on sales. Luckin said the introduction of new items, such as Luckin Tea and a fruit juice range contributed to eight million new customers during the period.

Tea was cited as a key sales driver, with the percentage of non-coffee items sold, which also includes fruit juices and food items, rising from 34.8% in the first half of 2019 to 44.9% in the third quarter.

The domestic coffee chain opened a further 700 stores during the third quarter, taking its total Chinese portfolio to 3,680 stores. However, the vast majority of Luckin’s stores are pick-up locations with little or no in-store seating.

A breakdown of Luckin's store portfolio reveals 3,433  pick-up format locations, 138 so-called ‘relax’ stores with conventional café seating and 109 delivery kitchens with no store front access.

Total net revenues for the nine months to 30 September 2019 were 2.92bn yuan (US$409.8m), representing a net loss of 1.76bn yuan (US$246.9m). Luckin forecasts revenues of 2.1bn-2.2bn yuan ($300m-$314m) for the fourth quarter 2019.
 

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