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Luckin counts the cost of the Starbucks battle



  The number of Luckin Coffee Inc stores is 2,963, about 1,000 fewer than Starbucks. Luckin plans to open 4,500 stores by the end of the year. (AP photo)
The number of stores at Luckin Coffee Inc is 2,963, about 1,000 less than Starbucks. Luckin plans to open 4,500 stores by the end of the year. (AP photo)

BEIJING: Luckin Coffee Inc posted a better-than-expected loss, as the cost of store openings and significant discounts competed with Starbucks Corp. and the US listed shares of the Chinese company fell sharply on Wednesday.

The startup, which opened its doors early last year and traded its shares in May, aggressively issued 593 new deals in the June quarter. Revenue growth increased many times over the period, with losses increasing more than threefold as it provided low-cost alternatives to US coffeehouse giant Starbucks.

Luckin, who had previously avoided a profit-making schedule, told Reuters, "Our shareholders want us to focus on revenue growth and revenue growth," Luckin's Chief Financial Officer said We expect to reach some sort of break even on the EBIT level towards the end of next year, "said CFO Reinout Schakel to Reuters.

The path to achieving that would be the offer Schakel said Coupons are smarter and, thanks to dynamic pricing, less favorable than they used to be.

The company's stock closed on Wednesday at nearly 1

7% at $ 20.44, but is still around 20% higher than the IPO price. [19659005] In the third quarter, Luckin expects revenues between 1.35 billion yuan (US $ 192.4 million) and 1.45 billion yuan (US $ 1.45 billion), with analysts expecting sales of US $ 229.4 million [19659005] On adjusted In the quarter ended June 30, Luckin lost 48 cents a share. According to IBES data from Refinitive, analysts expected a loss of 43 cents.

Luckin's number of stores stood at 2,963, around 1,000 less than Starbucks. Luckin plans to open 4,500 stores by the end of the year.

Luckin's rapid expansion is in stark contrast to Starbucks, which opened its first store in China in 1999 and spent two decades reaching the current number of stores.

This was the US chain responsible for the rise of coffee drinkers in the largely tea-drinking country.

To stave off competition in China, Starbucks signed a supply partnership with Alibaba and opened its first express retail store last month – with a barista at the concierge counter to assist customers with ordering and picking – a direct challenge to Luckin's pickup format ,

Qian Zhiya, CEO of Luckin, said the company was well on its way to break even in the 3rd quarter of the year in any business, as increasing scaling would increase bargaining power to lower input costs. Charge level costs exclude marketing costs.

Ben Cavender, Shanghai-based director of the China Market Research Group, warned that this could be a big challenge.

"It's difficult because they've trained consumers to only want the stores when there are big discounts," he said, adding that every store "does not attract enough customers to cover its operating costs" Luckin has also grown beyond coffee and allows customers to buy food and other beverages through its app. "Qian said Luckin recently launched tea products that could add to a fall in coffee sales in the afternoon and tested the ability to order coffee machines To bring places such as small office buildings and gas stations to the market.

The company earlier indicated that it was also looking for partners to expand in other countries. Reuters


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