A barista packs a coffee for sale online at a Luckin Coffee store in Beijing, China July 17, 2018.
Jason Lee | Reuters
Shares of Luckin Coffee fell on Wednesday after the coffee chain reported greater losses than expected, as it is expanding rapidly and discounting its drinks in an effort to challenge Starbucks for control of the Chinese coffee market.
Luckin shares fell almost 8% in trading on the premarket. The stock, which has a market capitalization of $ 5.8 billion per Tuesday's close, had gained 37% since the company's first public offering in May. Founded less than two years ago, Luckin has grown to nearly 3,000 stores, making it the number two coffee chain in China behind Starbucks. Starbucks' stock, which has a market value nearly 20 times larger than Luckins, is up 21
This is what the company reported compared to what Wall Street expected, based on a survey of Refinitive analysts:
- Loss per share: 48 cents, adjusted, against 43 cents expected
- Revenue: $ 132.4 million against $ 130.3 million expected
Luckin reported a net loss in the second quarter of $ 99.2 million, or $ 0.96 per U.S. depositary
Excluding items, the Chinese coffee chain reported a loss of $ 0.48 per share, wider than the loss at SEK 0.43 per share expected by analysts surveyed by Refinitive. A company's initial earnings after disclosure may deviate from Wall Street expectations due to different stock numbers.
Net sales rose 648% to $ 132.4 million, topping expectations of $ 130.3 million. Luckin has tried to attract new customers by discounting the drinks, a strategy that Starbucks CEO Kevin Johnson has said is not sustainable.
After adding 593 net new locations during the quarter, the chain had 2,963 stores as of June 30. The majority of Luckin's locations are pickup stores, which are smaller and designed for customer convenience.
Although Starbucks became a global coffee chain with its larger and more homely cafes, the Seattle-based company follows Luckin's leadership and opens smaller express format stores in China. Starbucks had 3,922 stores in China as of June 30.