Luckin Coffee Reached its First Time of Gaining Positive Profit Since its Establishment

Consumer Staples Author: Contributor, 施放, Fuller Wang May 24, 2022 01:36 PM (GMT+8)

Luckin Coffee’s Q1 2022 financial report showed a good sign of the company’s development. Its growth in the stores opening marked the company’s position in China’s Coffee market.

Lucky coffee brand logo

On May 24, 2022, Luckin Coffee (LKNCY: OTC) released its unaudited financial report for Q1 2022. The net revenue of Luckin Coffee for this quarter was CNY 2.4 billion (USD 360.9 million), up 89.5% compared with CNY 1.3 billion (USD 195.5 million) in Q1 2021. The Q1 2021’s net loss was CNY 232.5 million (USD 34.9 million). In contrast, Luckin Coffee reported a net profit of CNY 19.8 million (USD 3 million) in Q1 2022, indicating that this was the first time that the company’s quarterly operating profit turned positive since its establishment.

The first quarter used to be Luckin Coffee’s hardest period in a year, due to the decrease in purchases during the Lunar Chinese New Year. However, this quarter has marked the differences between Luckin Coffee, and indicated its potential to grow in the future.

In Q1 2022, Luckin Coffee opened in a total of 556 new stores, up 9.2% compared with the previous quarter. As of the end of the first quarter, the number of Luckin Coffee stores was 6,580, including 4,675 self-operated stores and 1,905 affiliated stores. This indicates that Luckin Coffee has the highest number of coffee stores in China. Compared with the well-known coffee company Starbucks, Luckin coffee has more than 1023 stores in China. The revenue of self-operated stores for Q1 2022 was CNY 1.7 billion (USD 255.6 million), up 66.2% year-over-year. The revenue of affiliated stores was CNY 549.3 million (USD 82.6 million), up 239.3% year-over-year. The average number of monthly transaction users of Luckin Coffee was 16 million, up 83% year-over-year.

However, due to COVID-19 influences, Luckin Coffee is facing difficulty in maintaining its stores. Some temporary stores of Luckin Coffee were experiencing shut down due to several reasons. Especially during the serious lockdown of parts of the regions in Beijing and Shanghai, Luckin Coffee’s retail stores were seriously influenced.

Mr. Guo, Luckin Coffee’s chairman and CEO, commented on the Chinese coffee market as an incremental market with extremely high growth potential. Luckin Coffee also expressed its incentives in exploring new other areas to grow its business.