Luckin Coffee Delivers First Quarterly Operating Profit Since Founding

Chinese beverage chain Luckin Coffee released its unaudited 2022 first quarter report on Tuesday, showing it achieved revenue of 2.4 billion yuan ($359.9 million) during the period, an increase of 89.5% year-on-year, delivering the first quarterly operating profit since its founding.

According to the financial report, the performance growth of Luckin Coffee in the first quarter of 2022 came from an increase in the brand’s number of stores on one hand, and an increase in customer and product sales on the other hand. In the first quarter of 2022, Luckin Coffee opened 556 new stores, bringing the total to 6,580, an increase of about 33% compared with the end of the first quarter of 2021. In the first quarter of 2022, the average monthly paying customers of Luckin Coffee also increased from 8.7 million in Q1 last year to 16 million this year, which also led to an increase of 41.6% in same-store sales of its self-operated stores.

In the financial report, Luckin Coffee also disclosed the impact of Chinese pandemic control measures on its stores this year, saying that in March, an average of 700 stores each day had to suspend business. Due to the Shanghai outbreak, the average total number of stores suspended from April 1 to the day before the financial report was released increased to 950.

However, under the influence of the pandemic, Luckin Coffee delivered its first quarterly operating profit. The firm’s GAAP operating income was 16.1 million yuan in the first quarter, while the non-GAAP operating income in the first quarter reached 92.1 million yuan, compared to a loss of 307.6 million yuan in the same quarter of 2021.

“The success mainly comes from the promotion of store operation ability and new product strategy. Historically, the first quarter had been our weakest quarter for our self-operated stores as a result of fewer purchases during the Chinese New Year holidays. We introduced 34 new freshly brewed products during the quarter, which contributed materially to our results,” said Guo Jinyi, firm chairman and CEO.

In April 2021, Luckin Coffee launched a coconut latte product that quickly became popular, garnering cumulative sales of more than 100 million cups. According to the quarterly report, in April this year, the new “Coconut Cloud Latte” sold over 4.95 million cups in the first week after its launch.

With the growth of Luckin Coffee, the contribution ratio of franchise stores is also increasing. Among the company’s current 6,580 stores, the number of partnership stores has increased to 1,905. In the first quarter of 2022, partnership stores also contributed 550 million yuan in revenue, an increase of 239.3% year-on-year and accounting for about a quarter of the company’s total revenue.

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It is worth noting that franchise stores are also an important part of Luckin Coffee’s new strategy. Since January 2021, the brand has opened its franchises to various third-and fourth-tier Chinese cities. As of April 11, 2022, nearly 20% of Luckin Coffee’s stores were located in the third-tier and below cities. The coverage rate of Luckin Coffee’s stores in third-and fourth-tier Chinese cities exceeded 80% in 2021.