Luckin Closes In On Starbucks With Nearly 3K China Stores

Luckin Closes In On Starbucks In China

Chinese coffee startup Luckin Coffee has announced it is on pace to become the biggest coffee company in China this year, according to reports.

Luckin has opened 593 new stores in Q2 and has 2,963 in total, which is closing in on Starbucks' 3,600 locations in the country. However, the rapid expansion means the company is experiencing deep losses. Luckin went public in May, and this is its first quarterly earnings report.

The company experienced a new loss of $99.2 million, which is 48 cents per share, and stock in the company dipped 17 percent on Wednesday morning (Aug. 14). Luckin’s expenses, which came from opening new stores – including marketing and operations – totaled $232.9 million during the quarter, which is tripled from a year ago.

"I'm pleased to say we're now on track to reach store-level break-even at some point in the third quarter," said Jenny Qian Zhiya, Luckin's co-founder and CEO. "We remain on track to become the largest coffee network in China in terms of number of stores by the end of 2019."

The company’s revenue was a bright spot at $132.4 million, which is a 648 percent increase.

Luckin offers less expensive products with easy pickup and delivery options that are mobile-centric.

The company’s IPO raised $561 million at $17 a share. Its frantic expansion means it has yet to turn a profit. It’s been previously well-financed, with investors that include BlackRock, which also has shares in Starbucks. In 2018, Luckin had a net loss of $241 million on $125 million in revenue. The company said it will continue to market the company to increase its brand awareness. It also aims to continue expanding overseas, and recently signed a deal with Americana Group for the establishment of coffee shops in India and the Middle East.

"We're excited about the prospect of expanding the disruptive, technology-enabled model outside of China," Qian said. "Our strategy is to combine Luckin's technology, branding and supply chain with the local knowledge and [partner with] local players."



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