Luckin Coffee's first financial report after listing: Q2 had a revenue of 900 million, a loss of 680 million, and the share price plummeted 16.74%.

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Luckin Coffee, a local coffee shop chain, released its first earnings report since it listed on Nasdaq in mid-May on Aug. 14. According to the latest financial report, the company's net revenue in the second quarter of 2019 was 909 million yuan (the same below), an annual increase of more than six times. However, the company posted a net loss of 681 million yuan in the second quarter, compared with a net loss of 333 million yuan in the same period last year, an increase of 83.4 per cent year-on-year. This means that Luckin Coffee is still far from the profit target. Luckin Coffee was down 16.74 per cent by the close of US stocks on Aug. 14.

In the second quarter of 2019, revenue was 900 million yuan, loss was 680 million yuan, and cumulative loss was 2.227 billion yuan.

The financial report shows that in the second quarter of 2019, the net income of its products was 909 million yuan, an increase of 689.4% over the same period last year. In terms of the number of stores, the number of Luckin Coffee stores reached 2963 in the second quarter of 2019, an increase of 374.8% over the same period last year. Its operating loss in the second quarter was 55.8 million yuan, down from 81.7 million yuan in the same period in 2018. As the layout of stores across the country continues to sink, the number of Luckin Coffee trading users was 22.8 million in the second quarter of 2019, compared with 2.9 million in the same period in 2018, an increase of 686 percent over the same period last year, and 5.9 million new trading users in the second quarter.

However, in terms of profitability, this report card is not optimistic. In the second quarter of 2019, Ruixing posted a net loss of 681.3 million yuan, compared with a net loss of 333 million yuan in the same period last year. Previously, the net losses in 2017, 2018 and the first quarter of 2019 were 56.37 million yuan, 1.619 billion yuan and 552 million yuan respectively, with a cumulative loss of 2.227 billion yuan.

In fact, Luckin Coffee's marketing expenses are still at a high level. In addition to ongoing user subsidies and store expansion, marketing costs are also rising. In response, Qian Zhiya, CEO of Luckin Coffee, said that the brand is a very important asset, with marketing expenses of 43.7 million yuan in the first quarter of 2019, 240 million yuan in the second quarter, and 100 million yuan in the same period last year. In terms of operating expenses in the second quarter, Luckin Coffee's total operating expenses were 1.599 billion yuan, an increase of 243.9 percent from 465 million yuan in the same period last year. Of this total, sales and marketing expenses were 390.1 million yuan, up 119.1% from 178.1 million yuan in the same period last year. The financial report pointed out that the increase in expenses was mainly due to the increase in advertising and distribution costs in the process of expansion.

Although the net loss expanded in the second quarter, the financial report revealed that Luckin Coffee's store operating loss has declined. According to the data, the operating loss of Luckin Coffee stores fell by 31.7% to 55.8 million yuan compared with the same period last year, close to the break-even point of store operations. In addition, the number of Luckin Coffee express stores and premium stores has been increasing from 1811 and 86 in December 2018 to 2163 and 109 in March 2019, to 2741 and 123 in the second quarter of 2019, respectively.

Compared with Luckin Coffee's previous prospectus on the number of stores, Luckin Coffee, who got blood after listing, significantly restored the speed of opening stores.

Continue to burn money for growth, resume the speed of opening stores, and are expected to reach the break-even point in the third quarter.

At the earnings meeting, Ruixing attributed the reasons for the control of revenue growth and losses in the current quarter to the following:

The number of consumers continues to grow, and Lucky added 5.9 million new users in the second quarter of this year.

The number of goods purchased by consumers is increasing every month, which can be calculated from the average monthly sales of goods and the average number of users who place orders per month. at present, lucky users consume an average of 4.48 items per month.

Effective sales prices continue to rise, and officials explain that technology has helped Lucky to price goods flexibly.

The reduction in the cost of pre-opening stores is mainly due to Lucky's decision not to open high-cost premium stores (corresponding to Starbucks' core stores), but to focus on simple decoration and low-cost express stores.

Luckin Coffee's operating expenses more than tripled in the second quarter of 2019 compared with the same period last year, as 593 new stores were opened in that quarter, double the number in the first quarter. As of June 30, the total number of stores in China had increased to 2963, an increase of 374.8% over the same period last year. The average monthly sales of goods was 27.6 million, an increase of 589.7%. Luckin Coffee has promised that the total number of stores in the country will exceed 4500 by the end of 2019, which seems to be a long way from expectations. By contrast, market leader Chinese mainland has 3922 stores, an annual increase of 16%.

Looking forward to the third quarter, Luckin Coffee estimates that the company's revenue may be between 1.35 billion yuan and 1.45 billion yuan.

Qian Zhiya, founder of Luckin Coffee, said that due to economies of scale, improved bargaining power, improved operational efficiency brought about by technology and higher volume of store sales, the company has greatly reduced store operating losses. the company aims to break even by the third quarter of 2019.

Luckin Coffee CFO Reinout Schakel said frankly that in order to achieve our growth trend and profitability, it is very important to continue to invest.

"We need to strike a balance between profitability and growth, we have made a good push to achieve profitability at the store level, and we are very confident that we will be able to achieve this goal in the third quarter, but we do not want this to cause us to lose new users. This is the result of weighing all aspects." Reinout Schakel said.

Luckin Coffee's shares closed down 16.74 per cent at $20.44 on Wednesday because of weaker-than-expected second-quarter results. In the past 52 weeks, Luckin Coffee shares have peaked at $27.12 and as low as $13.71.

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