Luckin Coffee announced its Q2 financial report on Tuesday, with a year-on-year revenue growth of 35.5%, reversing the trend of two consecutive quarters of losses. However, the company's profit fell by 13% year-on-year, and the growth rate of store numbers hit a two-year low compared to the previous quarter.
1) Main financial data
Total revenue: The total net revenue for Q2 was 8.4026 billion yuan, a year-on-year increase of 35.5%;
Operating profit: The operating profit for Q2 was 1.0507 billion yuan, with an operating margin of 12.5%;
Net income: Net income was 0.8711 billion yuan, down 13% compared to the Q2 of 2023; Net income was 0.971 billion yuan without following the US Generally Accepted Accounting Principles (GAAP);
Earnings per share: basic and diluted earnings per share for American Depositary Shares (ADS) were both 2.72 yuan; earnings per share were 3.04 yuan without following Non-GAAP;
Operating cash flow: The operating cash flow for Q2 was 1.5491 billion yuan; as of June 30, 2024, Luckin Coffee had cash and cash equivalents, restricted cash, time deposits and short-term investments of 3.786 billion yuan.
Newly opened stores: A net of 1,371 new stores were opened in Q2, an increase of 7.4% quarter-on-quarter. As of the end of Q2, the total number of stores was 19,961, including 13,056 self-operated stores and 6,905 franchised stores;
Customer volume: Average monthly transaction customers for Q2 were 69.7 million, a 61.8% increase from 43.1 million in the same period last year;
2) Revenue by Business Segment
Product sales revenue: Revenue from product sales in Q2 was 6.5524 billion yuan, a 39.0% increase from 4.7156 billion yuan in the same period last year.
Net revenue from freshly brewed beverages was 6.014 billion yuan, accounting for 71.6% of the total net revenue in Q2.
Net revenue from other products was 0.4044 billion yuan, accounting for 4.8% of the total net revenue in Q2.
Other business revenue: Net revenue from other businesses in Q2 was 0.1341 billion yuan, accounting for 1.6% of the total net revenue in Q2.
Franchise store revenue: Revenue from franchised stores was 1.8502 billion yuan (about 0.2546 billion US dollars) in Q2, accounting for 22.0% of the total net revenue in Q2;
Luckin attributed the improvement in its business to record revenue, significant increases in beverage sales, and a 'surge' in the number of average monthly transaction customers.
Luckin Coffee CEO Guo Jingyi said:
"As we enter the second half of 2024, we will continue to focus on providing value to our customers while leveraging our enhanced supply chain and increased store count to introduce more innovative and high-quality products to our growing customer base. We believe we are well-positioned to increase our market share and enhance our product quality and brand awareness."
However, some analysts believe that the return to profitability may also be due to Luckin's rapid expansion in China slowing down. According to the financial report, the quarter-on-quarter growth rate of Luckin Coffee's online stores in Q2 was the lowest since the end of 2022, and significantly lower than the average increase of 2,500 new stores in the previous three quarters.
The financial report shows that Luckin Coffee added a net of 1,366 new stores in China in Q2, bringing the total number of stores to 19,924. In addition, the company opened five net new stores in Singapore, currently its only international market, with a total of 37 stores.
Earlier this month, Luckin Coffee opened a new store in Beijing, bringing the total number of stores to 20,000. Guo Jingyi said that this milestone "highlights its dominant position in China's coffee chain".
Last year, Luckin Coffee's annual sales in China exceeded Starbucks by nearly $350 million. Seattle-based Starbucks operates over 7,000 stores in the world's largest branded coffee shop market, with sales down 12.5% and 8% in China in the first two quarters of 2024, respectively.