Luckin Coffee sees strong recovery in 2021 but profitability remains elusive

Luckin Coffee now operates more than 6,000 stores in China | Photo credit: via Shutterstock

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Luckin Coffee has reported a positive year of trading as it emerges from the pandemic and completes a major restructuring of its debts.
 
Posting its full-year results to 31 December 2021, Luckin Coffee said revenues grew 97.5% to reach RMB 7.8bn ($1.2bn). The coffee chain opened net 1,211 stores over the period to reach 6,024 stores, comprised of 4,397 company operated and 1,627 licensed locations. 
 
Luckin also said average monthly transacting customers reached 13 million in 2021, a 55% increase on 2020.
 
“We are very pleased to report strong overall performance in the fourth quarter and fiscal year 2021,” said Dr. Jinyi Guo, Chairman and CEO, Luckin Coffee.
 
“We opened more than 350 net new stores during the quarter and are one of the largest coffee networks in China by the number of outlets, with more than 6,000 stores as of December 31, 2021. Building on our positive momentum, the team has delivered strong same store sales growth for our self-operated stores resulting from increased number of transacting customers, increased items sold and higher average selling prices. For our partnership stores, we witnessed a substantial increase in revenue contribution as we expanded into lower-tier cities across China. This partnership model has proved highly complementary to our self-operated store strategy.”
 
The technology-led coffee chain also recorded a significantly reduced operational loss of RMB 539m ($85m) for the year compared to RMB 2.6bn ($406m) in 2020.
 
Nevertheless, despite Luckin’s ever-narrowing losses, the coffee chain has still yet to turn a profit since opening its first stores in late 2017.
 
In addition to tackling the challenges of the pandemic, the embattled coffee chain has been seeking normalise its business following a $320m accounting scandal that rocked the business in 2020.

Now under new leadership following the company's dismissal of former CEO Jenny Zhiya Qian and former COO Jian Liu, Luckin has made progress in stablising its operation and stemming operational huge losses.

Notably, the chain completed its provisional liquidation in March 2022, with the The Financial Times reporting that the Xiamen-based coffee chain is planning to relist its shares in the US two years after being delisted from the Nasdaq.