Chinese beverage chain Luckin Coffee has announced its financial report for the second quarter of 2022, as well as the appointment of An Jing as its new Chief Financial Officer, effective August 8. An succeeds Reinout Hendrik Schakel, who has served as the company’s CFO and Chief Strategy Officer since January 2019. Schakel will continue to serve as the company’s CSO.
The report shows that the net revenue of Luckin Coffee in the second quarter increased by 72.4% year-on-year to 3.29 billion yuan ($493.2 million), while the Non-GAAP’s net profit was 267.5 million yuan – much higher than 92 million yuan in the same period of 2021. Self-operated stores’ same-store sales growth and store level operating profit in the second quarter was 41.2% and 30.6% respectively.
The net number of new store openings in the second quarter was 615, ending the second quarter with 7,195 stores, including 4,968 self-operated stores and 2,227 partnership stores.
As one of the chain coffee brands with the largest number of stores in China, Luckin Coffee continued to implement the strategy of “self-operated + partnership” in the quarter. On the one hand, it continuously covers more high-tier cities through self-operated stores, and on the other hand, it is quickly exploring small-town and rural markets through partnership stores. According to Luckin Coffee’s Chairman and CEO Guo Jinyi’s statement during the telephone conference after the release of financial report, the performance of newly opened stores in Yinchuan and Xining, two cities in northwest China, was very strong.
However, it is undeniable that the pandemic still had a certain impact on Luckin Coffee in the second quarter. During this time, it temporarily closed an average of about 670 stores every day in the country. In addition, it experienced around 900 daily store closures on average in April and May. Moreover, the traffic control in various places has also been bringing challenges to the supply chain and warehousing system.
From another point of view, Luckin Coffee’s growth in the second quarter benefited from its past accumulation and dynamic adjustment in three aspects: people, goods and the market.
In the second quarter, the average monthly trading customers of Luckin Coffee increased by 68.6% to 20.7 million compared with the same period in 2021. Among them, the number of new customers exceeded 10 million in the second quarter, and the number of followers of its WeChat official account has now exceeded 30 million.
Luckin Coffee successfully launched 34 new products during the second quarter and sold over 24 million cups of its “Coconut Cloud Latte” from its launch in April 2022 through the end of the second quarter.
Kunshan Factory, the second coffee baking factory of Luckin Coffee with a designed production capacity of 30,000 tons, will start construction at the end of this year. Through the introduction of Pu’er Coffee, Luckin has become one of the most important buyers of Yunnan coffee beans.
The stores based on the firm’s digital management system make rent and labor costs more intensive and efficient. In addition, Guo Jinyi emphasized in a telephone conference that the company’s digital capability based on technological advantages is its most significant difference from traditional catering enterprises.
Guo Jinyi issued the following statement: “In the second quarter, there are two technical achievements to share. First, the ‘Double Cloud Project,’ which took five quarters to build, was successfully put into operation at the end of June this year, achieving the goal of supporting 5 million orders every day. Second, in order to further enhance the transparency of business and financial systems, we are promoting the creative introduction of blockchain technology into business and financial data management. Through making use of the characteristics of blockchain such as multi-participation, non-tampering and traceability, we can store key control links and important data in real time, so as to strengthen the reliability of business and financial control. This also makes us a pioneer in introducing blockchain into operation and financial system in the catering consumption industry.”
In addition, special attention should be paid to the fact that after successfully completing debt restructuring in the first quarter, Luckin Coffee has made substantial progress on resolving US securities litigation. It received final court approval for a federal class settlement and has made substantial progress in resolving remaining opt-out litigation. The developments mark significant progress by Luckin Coffee in its attempt to resolve longstanding issues.
Luckin Coffee’s board has established a Sustainable Development Committee to advise it in fulfilling oversight responsibilities with regard to sustainability matters. The committee is co-chaired by Michael Chen, Managing Director, and Guo Jinyi.
According to Luckin Coffee’s plan, it will publish its first corporate governance report in the fourth quarter of 2022, in an effort to provide stakeholders with greater transparency on its ESG-related work progress. The firm hopes this will shed light on its efforts in resolving historical issues, governance improvements, and internal control compliance.