Insights

Luckin Coffee 2Q 2019 Results

08 October 2019  |  TRADING IDEAS

Luckin Coffee Inc (ADR – NASDAQ: LK)

Luckin Coffee, a China based coffee chain company, posted 2Q19 quarter results for the first time since its IPO.

  • Luckin Coffee has opened 200 new stores per month on average;
  • Had strategic focus on pick-up stores, while reducing delivery specialised stores;
  • Increased cash reserves through its IPO;
  • Launched new products targeting the younger generation.

Revenue


Luckin coffee gained 909 million RMB in revenue, up 648% year-on-year, while increasing its operating loss to 689 million RMB in 2Q19.


Freshly brewed drinks, mainly coffee, is the biggest revenue stream for the company (659 million RMB) followed by other products such as snacks and juice (210 million RMB).

Luckin Coffee was founded in 2017 in China and went public on Nasdaq on May 17th 2019. 2Q19 results were the first quarterly earnings release after its IPO.

Luckin Coffee owns three types of stores: Pick-up Stores, Relax Stores and Delivery Kitchen.

Pick-up Stores

Pick-up stores have limited seating and are typically located in areas with high demand for coffee, such as office buildings, commercial areas and university campuses.


Relax store

Relax stores are generally spacious, have extended seating available and larger than 120 square meters in size.


Delivery Kitchen

Delivery kitchens only serve delivery orders which enables the company to reduce rental and fitout expenses.




Looking into the store type distribution, pick-up stores accounts for 92.5% of total stores. Relax stores have also been on an increase.



Luckin coffee opened 593 new stores in the second quarter of 2019, which equals 200 store openings per month, on average.

200+: Beijing, Shanghai, Jiang, Zhejiang, Guangdong

101~200: Shandong, Fujian

51~100: Hunan, Henan

0~50: Yunnan, Guizhou

Luckin operates stores across 12 cities in 5 provinces. In the largest cities, such as Beijing and Shanghai it has more than 200 stores.


The company has cut down delivery kitchens while expanding pick-up stores. Percentage of delivery orders on total orders decreased to 19.8% from 62.2% a year ago.

Key Metrics


Number of customers increased by 1.7 million to 6.1 million from the previous quarter. Items sold increased by 11.4 million to 27.6 million in 2Q19.

Looking into the cost structure, costs other than sales and marketing expenses improved year-on-year. The company has invested in sales and marketing expenses to offer discounts to expand the customer base and increase brand awareness.

Luckin coffee increased cash and cash equivalent through its IPO in May 2019, valued at 3.9 billion RMB (+2.8 billion RMB) at the end of 2Q19.

Stock price




Looking at cash flow, the company reported 5.5 billion RMB in cash flow from financing activities, which was raised through its IPO.

Current market cap of Luckin Coffee is $4.8 billion and EV is 30 billion RMB.

Luckin Coffee launched “Luckin Tea” in July 2019. China’s freshly brewed tea has no major player in the market, which is due to the difficulty in supply chain management and inconsistent quality of each franchisee. Luckin Tea sells 11 varieties of tea targeting the younger generation in China.


Looking into the future and global expansion opportunities, Luckin Coffee entered into a co-operation agreement with Americana Group, a Kuwait based integrated food product company. With this partnership, they are going to develop a new retail coffee business in the greater Middle East and India. Luckin Coffee aims to expand into the Middle East with its retail business know-how and Americana Group’s resources.

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The original article was published by Stockclip, Inc. on 17/08/2019.

Risk Disclaimer: The information above is of general nature only and does not take into account your objectives, financial situation or investment needs. Prior to you make an investment decision, please make sure you carefully read and fully understand our Financial Services Guide, Terms and Conditions, Privacy Policy and other relevant documents that you can obtain from this website. Monex Securities Australia Pty Ltd (AFSL No. 363972; ABN 84 142 210 179) is the Financial services provider. Financial products trading carries risks and may not be suitable for all investors. You are strongly recommended to seek independent financial advice before making any investment decisions.

Luckin Coffee,

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