Luckin Coffee CFO Talks Trade War, Competition And Path To Profitability

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China-based coffee chain Luckin Coffee Inc (NASDAQ: LK) is looking to gain market share in the local market by differentiating against competitors by offering an affordable but also differentiated alternatives, company CFO Reinout Schakel told CNBC.

What Happened

Luckin Coffee reported second-quarter results and the company is “very happy” with its performance, Shakel said on CNBC. The company heavily focused in the quarter on acquiring and retaining customers while simultaneously increasing its selling price.

The company looks to separate itself from rival Starbucks Corporation (NASDAQ: SBUX) by not only selling beverages at around half the cost but prioritizing takeaway and delivery, he said. This is where the company is gaining share although the market is large enough for more than one player.

Why It’s Important

The impact from a slowing Chinese economy is “starting to be felt more” by the middle class population which stands at around 300 million people, he said. However, Luckin’s core message of offering affordable and quality coffee will help in market share gains.

“I think overall there will be a bit of softness across the market you feel,” he said. “It will hit, sort of, consumer confidence at some point, I think,” he said.

View more earnings on LK

Luckin is guiding investors to hit store-level break-even profit as soon as the third quarter 2019, he said. The company is “on the right track” to hit its near-term goal and move on to a longer-term objective of improving store-level profitability and lower expenses.

Price Action

After taking a big hit Wednesday, shares of Luckin Coffee traded around $20.49 Thursday afternoon.

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