lucking coffee

LUCKIN’S Q3 RESULTS POINT TO SUCCESSFUL STRATEGY IN CHINA

Luckin narrowly fell short of posting a profit according to unaudited results. The company has made a dramatic recovery following a close brush with bankruptcy after admitting fraud in 2019,  forcing it to delist from the US stock market. 

Under new management, and in sharp contrast to Starbuck’s anaemic results in the region, the company is thriving and announced total net revenues for the third quarter of $364.7m which is over a 100 per cent increase from the same quarter last year.

Luckin accomplished this in part by increasing sales by 83.9% to $300.2m as well as a dramatic increase of revenues from partnership stores which saw revenues grow by 355% over the previous year to $264.6m.

Additionally,l their average monthly customer numbers increased to 14.7 million which is up 79.2% from the previous year.

These numbers demonstrate that whatever the US investors may think of Luckin, the Chinese consumer likes the brand.

The net loss was cut by 99 per cent to $3.6m for the quarter ending 30 September driven by a combination of increased revenues and increased margin. This is a trick that is easy in concept, and hard to achieve, in practice.

Chairman and Chief Executive Jinyi Guo said the strong performance was due to “increased customer retention and order frequency, greater brand recognition, and our products achieving higher average selling price.”

Increased customer retention and order frequency, greater brand recognition, and our products achieving higher average selling price.

Chairman and Chief Executive Jinyi Guo

We are seeing strong performance across the business in the third quarter with increased customer retention and order frequency, greater brand recognition, and our products achieving higher average selling price. Specifically, some of our innovative products, such as iced coconut latte, were very well received by our customers, benefiting from the relatively hot weather (compared to other seasons).

Further, we continued to execute against our strategic plan with the expansion of our Luckin Partnership stores contributing significantly to revenue growth. Our improved profitability is demonstrated through the significant reduction in operating losses for the quarter, as well as our store-level operating margin increasing to over 25%.

We appreciate the dedication and contribution of all Luckin Coffee employees and the continuous trust and support of our customers. While we are pleased with the latest quarterly results, we remain focused on the execution of our long term strategic plan — continue providing outstanding and innovative products and services to our customers and driving long-term value for shareholders.

Chairman and Chief Executive Jinyi Guo

It has to be said that these are unaudited accounts, although it is difficult to believe the company would repeat the mistake that almost sunk them just two years ago. The change in the company’s fortune is quite remarkable, and credit should be given to the current executive team, that has performed something of a miraculous retail turnaround.

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