Luckin reports fourth quarter results

The formerly scandal-tainted coffee chain added 8,000 new stores last year, making it China’s largest operator with 16,248 outlets


By Teri Yu

Luckin Coffee Inc. (LKNCY.US), the cheap coffee chain that became embroiled in a fake sales scandal that led to its delisting in 2020, continued its comeback under a new management team and business model with its latest financial results released on Friday.

Its annual revenue for 2023 rose 87.3% from the previous year to a record 24.9 billion yuan ($3.51 billion), surpassing rival Starbucks’ (SBUX.US) $3.1 billion sales in China for the year. Luckin attributed the strong gains to its growing customer base, fuelled by a huge jump in its store count using a franchise model, as well as its diverse product offerings, despite intense industry competition.

The company almost doubled its store footprint with the opening of an additional 8,000 new stores during the year, making it China’s largest coffee chain with 16,248 outlets in more than 300 Chinese cities. The network includes 30 outlets in Singapore, currently its sole overseas market. By comparison, Starbucks had nearly 7,000 China stores as of December last year.

“2023 was a significant milestone year for Luckin Coffee,” said Chairman and CEO Guo Jinyi. “Luckin Coffee achieved another year of record-breaking revenue, thanks to its unique business model, continuous product innovation and scale advantage,” he added on the company’s earnings call.

The company reported net income of 2.85 billion yuan in 2023, up sharply from 448 million yuan the previous year, with a net profit margin last year of 11.4%.

Full-year revenue from self-operated stores totaled 17.9 billion yuan, up 82.7% year-over-year and accounting for about 72% of its total revenue. Same-store sales growth for its self-operated stores in 2023 rose 21%.

Luckin launched 102 new products in last year, including a latte infused with Moutai, China’s most famous liquor, that broke its sales record for a single item with 45.8 million cups sold last year after its launch in September.

The company also reported strong fourth-quarter results, with revenue up 91% year-on-year to 7.06 billion yuan in the three-month period. Its net income rose over four times to 296.4 million yuan in the same period.

Luckin’s over-the-counter traded stock was largely unchanged after the Friday announcement, closing 0.98% lower at $23.76.

Chinese coffee consumption has been on the rise over the last decade, attracting international brands like Starbucks and Tim Hortons to the market. At the same time, everyone is facing increasingly cut-throat competition as local brands like Luckin, Manner and Cotti all chase the same market.  

Research by World Coffee Portal showed the number of coffee shops in China grew 58% in 2023 to 49,691, overtaking the U.S. That growth was led by the rapid expansion of small store formats and delivery-focused operators like Luckin and Cotti.

Luckin has positioned itself as a downmarket chain catering to young, tech-savvy customers with its coffee typically sold for about 10 yuan per cup via app-only ordering. It quickly rose to compete with Starbucks in China after its launch in 2017, and listed on the Nasdaq in 2019. But a scandal involving fabricated sales led to the resignations of both its chairman and CEO, a heavy fine and ultimately its delisting from the Nasdaq. Its shares continue to trade over-the-counter.  

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