Starbucks Rival Posts Higher Revenue Amid Bid to Take On U.S. Chain in China -- WSJ
November 14 2019 - 03:02AM
Dow Jones News
By Dave Sebastian
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (November 14, 2019).
Shares of Luckin Coffee Inc. rose roughly 14% on Wednesday after
the Beijing-based coffee chain's revenue soared as it added stores
and expanded its offerings beyond coffee.
The chain, which went public in the U.S. in May, on Wednesday
posted third-quarter revenue of 1.54 billion yuan ($215.7 million),
up more than sixfold from the same period last year.
American depositary shares of Luckin were trading at about
$21.60.
Backed by venture capital and run by local managers, Luckin
integrated delivery into the service at its bare-bones stores from
the outset and has become a rival to Starbucks Corp. in China.
"I believe Luckin Coffee will reach its goal to become the
largest coffee player in China by the end of this year," Charles
Lu, Luckin's co-founder and chairman, said on a call with analysts
and investors. "For those who spend time in China, you can see that
Luckin Coffee is already part of the daily life in China."
The chain, founded in October 2017, had 3,680 stores during the
quarter -- many just feet away from a Starbucks cafe -- up from
1,189 stores in the year-earlier period. On average, it had 9.3
million monthly transacting customers for the quarter, compared
with 1.9 million in the same period last year.
Apart from coffee, Luckin is counting on tea, which accounted
for about 20% of the company's sales of freshly brewed drinks for
the quarter. The company in July began offering its Luckin Tea
products nationwide in China, with beverages such as bubble tea --
milk tea topped with tapioca balls -- fruit tea and tea
macchiato.
Luckin Tea's launch, however, contributed to operating expenses
of 2.13 billion yuan, up from 726.4 million yuan a year ago, driven
in part by a rise in cost of materials and marketing expenses. The
company's loss widened to 531.9 million yuan from 484.9 million
yuan in the comparable quarter last year.
For the quarter, the company's sales of freshly brewed drinks
shot up to 1.15 billion yuan from 192.7 million yuan a year
ago.
For the fourth quarter, the company said it sees revenue from
products of 2.1 billion yuan to 2.2 billion yuan, excluding revenue
generated from stores operated under a new retail-partnership
model.
Luckin's delivery system guarantees shipment within a half-hour
in major cities, and Starbucks has responded by expanding its
delivery business in the country.
Starbucks faces tough competition in China, its second-biggest
market after the U.S. Consumer spending in China has slowed, and
Starbucks has become a target for democracy protesters in Hong Kong
who are critical of the company's franchisee there.
(END) Dow Jones Newswires
November 14, 2019 02:47 ET (07:47 GMT)
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