Luckin Coffee

LUCKIN COFFEE ROARS BACK FROM BANKRUPTCY WITH STRONG FINANCIAL RESULTS

Chinese coffee company Luckin Coffee reported that its net revenue for the first half of this year increased 106% to RMB 3.1 billion (approximately US $492.9 million) year-on-year.

This financial report, announced on October 1st, is the company’s first normalised one since the incident in April 2020, when the company admitted to reporting fraudulent sale numbers of $310 million. For the past year, the Chinese coffee company settled the financial fraud in hopes of making a comeback with the business, which involved paying a penalty of $180 million and settling a US class-action lawsuit that amounted to a sum of $187.5 million.

Even though Luckin Coffee filed bankruptcy in the US in February this year, the coffee chain has steadily grown in China’s coffee market, under the direction of a more competent Board.

The company’s chairman and CEO Guo Jinyi attributed their growth in revenue to the increased revenue from self-operated stores, higher prices and order frequency, and improved cost structure.

Luckin Coffee plans to grow more partnership stores as part of its plan to shift to an asset-light model. From partnership stores, the company gets 40% of the profits if sales reach an agreed earning threshold. As of June, the company operates 4,018 self-operated and 1,241 partnership stores – this is a 5.8% decrease in the self-operated model and a 50.6% increase in partnership stores.

Shifting to more partnership stores has worked out for Luckin Coffee so far as revenue from partnership stores surged 357.8% to RMB 441.2 million (approximately US $69.05 million) year-on-year. Last year, revenue from partnership stores only made up 6.2% of the company’s total revenue. This year, it jumped to 13.9%.

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