Luckin’s net losses doubled in Q2 as cash-burning continues

By Emma Lee
1 min read
A Luckin takeout order sits on a counter at one of the chain’s Shanghai stores. (Image credit: TechNode/Jiayi Shi)

Shares in Luckin Coffee tumbled in the US overnight after the Chinese coffee chain upstart reported widening losses in the second quarter despite beating revenue expectations.

Why it’s important: Widely considered as a challenger to Starbucks’ crown in China, Luckin Coffee burst onto the scene in 2018 and soon became the country’s number two chain despite burning through cash to fuel its rapid expansion.

  • The Xiamen-based firm raised $561 million in a US IPO in April this year.

China’s thirst for coffee underlies the rapid rise of Luckin Coffee

Details: Luckin Coffee shares closed 16.7% lower in US trading overnight after it reported that net losses doubled to RMB681.3 million ($99.2 million) in the quarter.

  • Revenue rose sevenfold to RMB 909.1 million ($132.4 million) in Q2, beating Refinitv’s analyst estimate of $130.2 million.
  • The firm’s per-share loss was 48 cents, missing Refinitiv’s estimate of 43 cents and Zacks Investment Research’s 44 cents.
  • Total operating expenses rose 244% to RMB 1.6 billion from RMB 465.0 million in the second quarter of 2018.
  • The company had 2,963 stores as of the end of the quarter, nearly five times as many as the 624 locations from a year ago.
  • Store level operating losses dropped to RMB 55.8 million from RMB 81.7 million in a year ago. The company expects to reach a store-level break-even point in Q3.

“We are pleased with the performance of our business as we continue to execute against our long-term growth plan,”

—Jenny Qian, Chief Executive Officer at Luckin Coffee.

Context: Despite the surging losses, the coffee chain is showing no signs of slowing down.

  • In July, the firm inked a deal to expand into the Middle East and India through a joint venture with Kuwaiti food company Americana Group.
  • Luckin rolled out a range of tea-based beverages, including cheese tea and more traditional styles across its 3,000 stores spanning 40 cities earlier this year.

Luckin joins Starbucks in blurring boundaries between coffee and tea