Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Luckin Coffee Inc (LKNCY, Financial) achieved a strong year-over-year revenue growth of 35.5%, reaching RMB8.4 billion.
- The company opened 1,371 new stores in the second quarter, bringing the total number of stores to 19,924 in China.
- Net profit for the quarter was RMB871 million, with a net profit margin of 10.4%.
- The number of monthly average transacting customers reached a new record high of 69.69 million.
- Luckin Coffee Inc (LKNCY) launched 30 new SKUs in the second quarter, including popular items like the Light Coffee Lemonade, which sold 5.08 million cups in the first week.
Negative Points
- Operating margin decreased to 12.5% from 18.9% in the same period last year.
- Self-operated store profit margin dropped to 21.5% from 29.1% in the same period last year.
- Operating expenses increased by 46.2% year-over-year, driven by business expansion efforts.
- Sales and marketing expenses as a percentage of revenue increased from 4.9% to 5.1%, reflecting higher costs for brand recognition and market positioning.
- The company reported a loss and expenses related to previously reported fabricated transactions and related restructuring amounting to RMB1.2 million.
Q & A Highlights
Q: What were the main drivers behind Luckin's rebound in performance in the second quarter? Will this profit margin be sustainable?
A: (Jinyi Guo, Chairman and CEO) The positive results were driven by proactive adjustments, effective utilization of our business model, and favorable weather conditions. Our expanded footprint allowed us to reach more consumers during the peak season. Strategic store placements and new product launches also contributed significantly. We aim to maintain strong revenue and profit levels by continuing to launch summer-friendly products and ramping up marketing efforts.
Q: The pace of store openings slowed down in the second quarter. Will the company make further adjustments to its store opening strategy?
A: (Jinyi Guo, Chairman and CEO) We will focus on market share as our core development goal and adjust our pace based on competition. We will uphold our store opening standards to ensure quality and achieve sustainable growth. Our strategy includes innovative products and customer appreciation to create long-term value.
Q: Can you provide more details on the financial performance and key metrics for the second quarter?
A: (Jing An, CFO) Total net revenue reached RMB8.4 billion, a 35.5% year-over-year growth. Operating income was RMB1.05 billion with a 12.5% margin. Net profit was RMB871 million with a 10.4% margin. We opened 1,371 new stores, bringing the total to 19,924 in China. Monthly average transacting customers reached 69.69 million.
Q: How is Luckin Coffee addressing competition in the Chinese coffee market?
A: (Jinyi Guo, Chairman and CEO) We remain vigilant in addressing consumer needs, maintaining high store quality, and adhering to a steady and sustainable store opening strategy. We are expanding in high-tier cities and accelerating into low-tier markets through our partnership model. We also focus on product innovation and enhancing our digital advantages.
Q: What are the company's plans for international expansion?
A: (Jinyi Guo, Chairman and CEO) We have 37 stores in Singapore and recently opened our 20,000th store in Beijing. We aim to continue expanding our international footprint while maintaining a focus on high-quality coffee and customer experience.
Q: Can you elaborate on the sustainability initiatives undertaken by Luckin Coffee?
A: (Jinyi Guo, Chairman and CEO) We follow a sustainable development strategy, incorporating green and low-carbon principles into our operations. Our 20,000th store is LEED Platinum certified, and we have three LEED Gold certified stores. We are also advancing research in coffee health in collaboration with Beijing University Health Science Center.
Q: What new products were launched in the second quarter, and how did they perform?
A: (Jinyi Guo, Chairman and CEO) We launched 30 new SKUs, including the Aromatic Coconut Flavored Latte and Lemon Americano. The Light Coffee Lemonade surpassed 5.08 million cups in sales during the first week of launch. These new products contributed significantly to our sales volume.
Q: How is Luckin Coffee ensuring a stable supply of high-quality coffee beans?
A: (Jinyi Guo, Chairman and CEO) We source premium coffee beans from top-quality regions like Brazil, Ethiopia, and Mainland China. We recently entered into agreements to purchase approximately 120,000 metric tons of coffee beans from Brazil over the next two years, ensuring a consistent supply of high-quality coffee.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
