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)

Copyright (c) 2019 Dow Jones & Company, Inc.
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