Founded in October 2017, the fast-growing China-based coffee company Luckin Coffee will have over 4,500 stores in the country by the end of 2019, Luckin Coffee chief financial officer Reinout Schakel said.
That's going to make it better than competitor Starbucks (SBUX), which now has more than 4,000 outlets in China and aspires to hit 6,000 by 2022.
With 3,680 outlets, Luckin Coffee (LK) finished the third half, up an impressive 209.5 million from a year earlier. By using software to map where to build shops, the firm has managed to grow rapidly in China.
Therefore, the stores of Luckin Coffee look more like kiosks than a traditional retail store like Starbucks which makes for fast builds.
The super-charged base development of Luckin Coffee's store branches - and its recent forays into tea and juice - have prompted those on Wall Street to believe it's going to be profitable sooner than expected. Schakel indicated that there is no "misguided view" of the market.
"Store-level efficiency is rising significantly, and we've got quite a bit of control. You can see a very clear trend in productivity with that power," the company said, adding that they have hit their store-level profitability for the third quarter this year. They also pointed out that they are "looking forward to continuing this trend to reach its break-even point sometime next year."
Luckin Coffee's sales have rallid to almost 209 percent to RMB 1,493.2 million for the third quarter. Operating profits for Luckin Coffee's stores clocked in at RMB 186.4 million versus a drop of RMB 126 million from a year ago. Adjusted earnings came in at a loss of RMB 2.08 a share compared to a loss of RMB 3.52 a share.
The turnaround of income for Luckin Coffee's stores helped set the stock price ablaze: Luckin's stock rises 32 percent in the five days following its earnings report for November 13.
A new wrinkle to the growth story: expanding with joint venture partners for Luckin Coffee brand outside China. Schakel claims Luckin Coffee has signed an agreement to open stores with a company in the Middle East. Yet he would not exclude the US sector from joining.
Luckin's stock is now roughly 60 percent above its $17 initial price bid, but in the six months since its public release, it has been a very top-selling product. However, the bears argue that their growth is unsustainable because they multiply too rapidly and increase their losses.
