Troubled Chinese coffee chain reveals 2020 sales increased by a third despite pandemic disruption as it continues efforts to normalise financial reporting following a $328m accounting scandal in April 2020
Embattled Luckin Coffee says it its making progress to normalised financial reporting
Luckin Coffee has said it is making progress in returning to normalised financial reporting after releasing its 2020 annual report.
The e-commerce coffee chain said revenues for the fiscal year ended December 31, 2020, were RMB4,033.4m (US$618.1m), a 33.3% increase on 2019, which it attributed to higher selling prices for its products.
However, the company also posted a RMB475.3m (US$72.8m) loss for the period, which it attributed to ‘expenses related to the previously announced investigations and restructuring’.
The company was rocked in April 2020 after it was revealed senior management had fabricated sales of around $320m. The scandal resulted in the sacking of then CEO Jenny Zhiya Qian, and COO, Jian Liu, and resulted in the Xiamen-headquartered company being delisted from the Nasdaq in June 2020.
Luckin has since battled to restructure its business and regain credibility among investors. It has also yet to post a profit since being founded in late 2017 and embarking on lightning expansion across China.
In February 2021, the coffee chain filed for bankruptcy
in order to restructure its financial obligations. The following April, it secured $250m
from investors to facilitate a company restructure and settle a $180m penalty agreed with the US Securities and Exchange Commission (SEC).
July 2021 saw Luckin Coffee restate its financial results for the second, third and fourth quarters of 2019. It also confirmed that fabricated transactions that began April 2019 had inflated the coffee chain’s net revenue for the year by RMB2.12bn ($328m).
“Luckin Coffee continues to make progress on returning the Company to normalized financial reporting,” said Dr. Jinyi Guo, Chairman and CEO of Luckin Coffee.
“In 2020, we delivered strong revenue growth and improvements in profitability. We have continued to expand and enhance our results of operation in 2021, and our team remains dedicated to delivering high quality products and services for our customers and executing on our strategic plan for the benefit of all stakeholders.”
As of December 31, 2020, Luckin Coffee said it operated 3,929 self-operated stores in 56 cities in China alongside 874 partnership stores.