Despite harsh Covid lockdowns, Luckin Coffee reported first-quarter earnings on Tuesday that showed a nearly 90% increase in income and its first ever revenue. It also has 6,580 stores in mainland China by the end of the period. This is more than Starbucks (SBUX), which only has 5,650 locations in China.
Luckin Coffee now claims to be the largest coffee chain in the United States. Some of the shops are run by the company itself, while others are run by other associates. Starbucks’ stores in China are wholly owned by the firm.
The Chinese company’s most recent reports provide a glimpse into its recovery, as it acknowledged making up some of its gross sales numbers in 2020, leading to its expulsion from the Nasdaq.
Luckin Coffee opened in 2017 as a sophisticated alternative to the typical café. It concentrates primarily on younger people, with takeaway booths and cashless payment options.
The company has seen a meteoric rise since its beginnings, quickly becoming one of China’s most valuable “unicorns,” or privately-held firms valued at at least $1 billion. It opened 2,000 stores in just 12 months on one floor.
Luckin Coffee went public in New York in 2019, to the delight of investors who anticipated it could be a serious competitor to Starbucks.
However, after admitting that its results were fabricated, the company was forced to retreat for the next 12 months. Luckin was delisted from the Nasdaq, and the company’s chairman and CEO were both sacked. The US Securities and Exchange Commission hit it with a $180 million fine as well.
However, after admitting that its results were falsified, the company was forced to retreat for the next 12 months. Luckin was delisted from the Nasdaq, and the company’s chairman and CEO were both sacked. The US Securities and Exchange Commission hit it with a $180 million fine as well.
The company’s shares currently trade over-the-counter in the United States. It possesses a market capitalization of $2.2 billion, down from more than $4 billion when it went public.
Luckin Coffee also has one specific person to thank for its most recent performance: Eileen Gu. She is a well-known Olympic athlete. Last summer, the company teamed with a Chinese freeski champion, which had a “significant effect” on the company.
In January alone, the company opened 360 stores — far “quicker” than usual in expectation of higher sales, according to Guo.
According to Guo, many Luckin stores are located in office buildings or universities, which means “we were able to maintain normal operations in these rather closed off places.”
Luckin Coffee and Starbucks
Starbucks, on the other hand, hasn’t fared so well: in the first quarter of this year, sales at stores open for at least a year fell by 23% in China.
In the company’s most recent earnings report, Starbucks CEO, Howard Schultz described the situation in the country as “unprecedented,” adding that “the high level of ongoing uncertainty” would cause the coffee chain to lower its financial guidance for the second half of the year. Wayne Chang of CNN contributed to this story.
This is an unexpected result, given that Starbucks is widely recognized as a major coffee shop that consistently grows. The outpacing of Luckin Coffee should be viewed as a test of whether a newcomer can outperform a giant.
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Source: Pehalnews