Luckin Coffee seeks path to profitability as finances improve

 

Luckin Coffee now operates a total of 5,259 stores across China | Photo credit: via Shutterstock

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Luckin Coffee has credited increased customer retention, order frequency, and the expansion of partnership stores as key factors behind its improving financial position. 
 
Reporting its financial performance for the six months ended June 30, 2021, Luckin posted revenues of RMB 3,182.5m (US$492.9m), a 106% increase compared to the same period in 2020.
 
Revenues from product sales rose 89.3% to RMB 2,741.3m (US$424.6m), while like-for-like sales grew 82.7% compared to -20.3% in the first half of 2020. 
 
In part, Luckin attributed its more favourable financial position to the roll-out of ‘partnership’ stores across lower tier cities in China. The Xiamen-based coffee chain said revenues from those stores stood at RMB 441.2m (US$68.3m), representing an increase of 357.8% compared to the same period in 2020.
 
Luckin now operates a total of 5,259 stores across China, with the number of company-owned sites decreasing 5.8% from 4,267 stores a year ago and the number of partnership stores increasing 50.6% from 824 to 1,241.
 
“Today, with a refreshed Board of Directors and leadership team, as well as the execution of our strategy to focus on our core coffee business and deliver sustainable growth and profitability, we are well-positioned to drive meaningful long-term value for our shareholders, and continue to provide outstanding products and services to our customers,” said Luckin Coffee Chairman and CEO, Dr. Jinyi Guo.
 
Despite improving sales, profitability remains elusive for Luckin. Net losses for the period stood at RMB 211.4m (US$32.7m) in the first half of 2021 – albeit an 86.4% decrease on the RMB 1,555.2m loss reported for the same period in 2020.
 
The embattled company, which remains in provisional liquidation, has been pursuing what it calls a path to ‘normalised’ financial reporting following a $320m accounting scandal unearthed in 2020 that brough the coffee chain to its knees.
 
In September 2021, the company released an annual report stating full-year 2020 revenues of RMB 4,033.4m (US$618.1m), a 33.3% increase on 2019, which it attributed to higher selling prices for its products.

The company also posted a RMB 475.3m (US$72.8m) loss for the year, which it attributed to ‘expenses related to the previously announced investigations and restructuring’.