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August 16, 2019

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Discounts hurt Luckin revenues

Chinese coffee chain Luckin reported wider losses in the second quarter after it offered deep discounts to woo new customers.

Shares in the Nasdaq-listed company shed the most on Wednesday since its listing in May, dropping by more than 16 percent to US$20.44.

Net loss doubled to 681.3 million yuan (US$99.2 million) compared with 333 billion yuan a year ago. After adding 593 new locations during the quarter, revenue jumped seven-fold to just over 909 million yuan when it posted the first earnings report since its IPO.

The second-largest coffee chain in China said its average monthly paying customers jumped four-fold to around 6.2 million as it introduced new lines of tea for those not interested in coffee. It said it expects to break even at every store during the third quarter.

In the second quarter, advertising and other expenses added 119 percent to 390.1 million yuan as it entered new cities. Over 90 percent of Luckin’s 2,963 stores are pick-up venues with limited dine-in space.


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