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April 6, 2020

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Luckin Coffee apologizes over faked sales figures

LUCKIN Coffee, China’s biggest rival to Starbucks, apologized yesterday after it revealed a top executive may have faked 2.2 billion yuan (US$310 million) worth of sales in 2019.

The company’s former chief operating officer Liu Jian and several of his staff have been suspended pending an internal investigation, it said in a US Securities and Exchange Commission filing last week.

“The company retains the right to take legal measures against those suspected to be involved. It will not shield them or be lenient,” Luckin Coffee said in a statement on Weibo yesterday.

Luckin Coffee added that its stores would remain open as usual, and acknowledged that it relied on the support of its customers.

The company said in its filing that fabricated sales extended from the second to the fourth quarter last year, making up almost half of its estimated 2019 revenue of US$732 million.

Luckin Coffee has not released its fourth-quarter results. After the bombshell on Thursday, shares in the NASDAQ-listed firm plunged over 70 percent to close at 6.4 dollars apiece.

China’s securities regulator said it pays close attention to and strongly condemns accounting fraud.

A listed company, no matter where it is listed, must strictly abide by the laws and norms of the relevant market and perform its obligation of information disclosure truthfully, accurately and completely, the China Securities Regulatory Commission said in an online statement.

The CSRC will resolutely crack down on securities fraud and effectively protect the rights and interests of investors, it said.

Launched in 2017, the Chinese coffee chain made a remarkable debut on Wall Street in May 2019, raising US$561 million during its IPO. Shares soared more than 50 percent during initial trading.

The start-up had aimed to dethrone Starbucks in China by pursuing an aggressive growth strategy, enticing customers with an app-based purchasing model which prioritized takeaway and deliveries, and generous mobile coupons.

By the end of 2019, the Xiamen-based chain’s 4,500 outlets on the Chinese mainland had already surpassed Starbucks’ 4,300 stores.


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