Luckin Coffee Q3 results exceed expectations, up 500% on 2018

Luckin Coffee has announced total net revenue of ¥1493.2 million (US$208.9 million) for the third quarter of 2019, an increase of 557.6 per cent from ¥227.1 million (US$32.35 million) in the same quarter of 2018.

“We are very pleased with our results in the third quarter. We exceeded the high-end of our guidance range, achieved a store level profit margin of 12.5 per cent and experienced continuous growth across all key operating metrics,” says Jenny Zhiya Qian, Chief Executive Officer of Luckin Coffee.

“These achievements follow a clear trend: an increase in volumes, efficiency and, as a result, profitability. During the quarter, product revenue grew at 557.6 per cent, which was 1.2, 1.4, and 2.7 times the growth rate of average monthly items sold, average monthly transacting customers, and number of stores, respectively.”

Average monthly total items sold in the quarter were 44.2 million, an increase of 470.1 per cent from 7.8 million in the third quarter of 2018.

Cumulative number of transacting customers increased to 30.7 million, an increase of 413.4 per cent from six million as of the end of the third quarter of 2018. During the third quarter of 2019, the company acquired 7.9 million new transacting customers.

Total number of Luckin Coffee stores at the end of the quarter was 3680, an increase of 209.5 per cent from 1189 stores at the end of the third quarter of 2018.

“During the third quarter, sales from freshly brewed coffee drinks continued to maintain very strong growth, and we believe we will reach our goal to become the largest coffee player in China by the end of this year. With our distinguished value proposition of high quality, high affordability and high convenience we believe that Luckin Coffee has become part of more and more Chinese consumers’ daily lives. China’s coffee market remains highly underpenetrated, so we are very excited about the growth potential ahead of us,” Qian says.

“At the same time, we continued to enrich our product offerings during the quarter. We launched Luckin Tea products nationwide in July 2019 and experienced strong incremental demand during the quarter, contributing to an increase in per store revenue and higher customer retention rate. We also started selling cups and other merchandise products and entered into a joint venture agreement with Louis Dreyfus Company to produce and sell co-branded Not From Concentrate juice products.”

Average total net revenues from products per store in the quarter were ¥449,600 (US$62,900), representing an increase of 79.5 per cent from ¥250,500 in the same quarter of 2018.

Store level operating profit in the quarter was ¥186.3 million (US$26.1 million), or 12.5 per cent of net revenues from products, compared to a loss of ¥126.0 million in the third quarter of 2018.

“We are engaged in ongoing discussions with potential strategic partners to set up joint ventures in markets outside of China. We consider these initiatives as an evolution of our current business model and are part of our strategy to serve more customers,” Qian says.

“With our disruptive technology-driven new retail model and our newly launched retail partnership model, we believe we can rapidly expand into adjacent markets with limited capital expenditures while maintaining a high degree of operational control and efficiency. We are pleased to have taken meaningful steps accomplishing our goals this quarter and remain extremely excited about the future of our business.”

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