Luckin Coffee (LK) on Wednesday reported third-quarter results that topped views amid breakneck growth that management expects will make the upstart bigger than Starbucks (SBUX) in China by year’s end. Luckin Coffee stock surged.


Luckin Coffee Earnings

Estimates: Wall Street expects Luckin to report a 37 cent per-share loss. Revenue for the recent IPO is expected to be $211.46 million.

Results: Losses narrowed to 32 cents per share on revenue of $215.7 million, up 540% in local currency. Average monthly total items sold in the quarter shot up 470% to 44.2 million.

The number of stores at the end of the quarter was 3,680 stores, up from 2,963 at the end of Q2 and more than triple from a year ago. Net revenue per store jumped 79.5% to $62,900.

Outlook: Luckin sees Q4 revenues from products to be between 2.1 billion-2.2 billion yuan.

“During the third quarter, sales from freshly-brewed coffee drinks continued to maintain very strong growth, and we believe we will reach our goal to become the largest coffee player in China by the end of this year,” said CEO Jenny Zhiya Qian.

Luckin wants to have more than 4,500 by the end of 2019. By contrast, Starbucks had 4,125 stores in China as of the end of its most recently reported quarter.

Luckin Coffee Stock

Shares popped 13% to close at 21.46 on the stock market today, gapping back above their 50-day average. Starbucks, which has targeted China as a major driver for future growth, rose 0.7%.

Luckin Coffee stock has a weak Composite Rating of 13, out of a best-possible 99, and an EPS Rating of just 2, indicating non-existent profit growth.

Luckin went public in May after pricing at $17 per share. The stock’s relative strength line has fallen since August, meaning it has trailed the S&P 500 over that time.

The chain tries to use mobile ordering, small stores and big data to serve customers quickly in what it has called a “100% cashier-less environment.”

Management, during its conference call in August, called China’s coffee market “highly underpenetrated” and said it had “significantly increased mass market consumption for coffee.”

But Luckin competes against smaller shops selling tea — long the hot beverage of choice in China — and Starbucks. And it has lost money as it grows at a torrid pace, promotes itself and tries to educate consumers about coffee consumption.

Luckin has also launched Luckin Tea and plans to set up a joint venture with Louis Dreyfus Co., which processes agricultural goods, to develop a Luckin Juice business.


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