FAST NEWS: Luckin’s operating profit surges on rapid expansion

The latest: Chinese coffee chain operator Luckin Coffee Inc. (LKNCY.US) announced Tuesday that its revenue in the second quarter jumped 88% year-on-year to 6.2 billion yuan ($870 million), while its operating profit surged 385% to 1.17 billion yuan, and its operating profit margin hit a record 18.9%.

Looking up: Luckin opened a net 1,485 new stores in the second quarter, bringing its total to 10,836, making it the first coffee chain in China with more than 10,000 stores.

Take Note: The company’s total operating expenses jumped 64.5% year-on-year to 5.03 billion yuan on the back of its rapid expansion. But its operating expenses as a percentage of net revenues fell to 81.1% from 92.7% due to faster revenue growth.

Digging Deeper: Founded in 2017, Luckin has attracted customers with its premium coffee served from minimalist stores, and has grown rapidly to surpass its main rival Starbucks (SBUX.US) in terms of stores in China. It listed on the Nasdaq in May 2019, but was delisted a year later and saw its shares moved to the over-the-counter (OTC) market after it admitted to fabricating 2.2 billion yuan ($330 million) in sales. With a new management team focused on an asset-light franchising strategy, Luckin has grown rapidly since the scandal, adding more than 2,600 stores in the first half of this year alone.

Market Reaction: Luckin shares jumped 13.2% to $33.18 on Tuesday, hitting a new 52-week high.

Translation by A. Au

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