The value-focused coffee chain’s first quarter sales fell below record levels in the second half of 2023, with lower revenues and higher costs contributing to a RMB 65.1m ($9m) operating loss
Luckin Coffee opened 2,340 net new stores in China during the quarter alongside two new stores in Singapore | Photo credit: P.L.
Luckin Coffee has sustained rapid outlet growth in its first quarter to exceed 18,500 stores in China but posted its first quarterly loss since the fourth quarter of 2021 following a dip in sales.
The value-focused operator opened 2,340 net new stores in China in the three months ending 31 March 2024 to reach 18,558 sites – many of which are delivery and pick-up only locations. Luckin Coffee also opened two new stores in Singapore during the quarter to reach 32 stores in what remains its only international market.
Beijing-based Luckin Coffee’s first quarter sales reached RMB 6.3bn ($869.5m) – 41% higher than the same period of 2023 but falling short of the RMB 7.2bn ($987m) and RMB 7bn ($995.1m) achieved in the previous two quarters.
Revenues from Luckin Coffee’s 12,199 company owned stores grew 46% year-on-year to RMB 4.6bn ($634.3m) with sales from franchised outlets growing 33% to RMB 1.5bn ($209m).
The fall in sales from the second half of 2023 contributed to a RMB 65.1m ($9m) operating loss – its first in two years.
Luckin Coffee said an increase in total operating expenses was primarily driven by outlet growth and strategic investments in branding and promotions. Marketing spend increased 63% compared to the first quarter of 2023.
Additionally, material costs rose 68% to RMB 2.9bn ($407.8m) while delivery expenses grew 6% to RMB 448m ($62m).
The value-focused coffee chain is also facing stiff competition from rival Cotti Coffee, with the chains currently locked in a price war that has pushed the promotional cost of beverages to as low as 9.90 RMB (US$1.37) per cup.
“We are pleased to report strong topline growth with increases in our total net revenues, net new store openings, and average monthly transacting customers. Such growth was accomplished despite seasonality headwinds and increased competition. Looking ahead, we will continuously take decisive actions to navigate any headwinds and deliver sustained value to our shareholders,” said Dr. Jinyi Guo, Chairman and CEO, Luckin Coffee.
In April 2024 Luckin Coffee commenced operations at a new 570,000sq ft roasting facility in Suzhou City, Jiangsu to shore-up its expanding supply chain The small-format operator has invested $120m in site, which it says is now the largest coffee roasting plant in China, with an annual roasting capacity of 30,000 tons.
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