Luckin Coffee released their third quarter 2019 earnings report indicating a 540.2% year-on-year revenue growth with 1.5 billion yuan. However, net losses of the company have also soared to 531.9 million yuan from 484.9 million yuan in the same period last year.
Nevertheless, Luckin still managed to beat analysts’ estimates for the quarter. The company’s NYSE-listed shares rose roughly 13% on Wednesday upon the release of the financial results. Experts attribute the rapid growth of Luckin Coffee’s revenue to the rapid expansion of the store network and frenzied subsidies.
The disruptor coffee-shop chain has also been trying to expand its business scope, diversifying from coffee with an independent brand Luckin Tea that is expected to challenge the current leaders of the Chinese milk and fruit tea market. Additionally, supply chain improvements will help to save costs and prompt further expansion for the company.
As for the structure, Luckin Coffee’s Q3 revenue can mainly divided into two categories: beverages including coffee, and other income such as delivery fees.
“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,” CEO and co-founder Jenny Zhiya Qian said in a statement.
Luckin’s achieved store-level profitability with an operating margin of 12.5% and managed to increase its customer base from 6 million at the end of the third quarter of 2018 to 30.7 million, an increase of 413.4%. As of the end of the third quarter, the company operated a total of 3,680 stores, an increase of 209.5% from 1,189 stores at the end of the third quarter of 2018.