Luckin Coffee (Minutes): Same-store sales growth has turned positive year-on-year.
Below is Luckin Coffee$Luckin Coffee(LKNCY.US) 2024 Q4 Earnings Call Minutes. For earnings analysis, please refer to《 Surviving 9.9! Luckin Turns the Tables, Cotti Barely Hangs On》.
1. Review of Key Financial Information
1. Significant Improvement in Same-Store Sales Growth: Q4 total revenue increased 36% YoY to RMB 9.6 billion, driven by our expanding store network and growth in monthly transacting customers. Net revenue from freshly brewed beverages was RMB 6.9 billion, accounting for 72% of total revenue; net revenue from other products was RMB 496 million, accounting for 5%. Same-store sales growth showed significant improvement, with store-level operating margin expanding 6.1 percentage points YoY to 19.6%, reflecting improved operational efficiency and a more balanced pace between store growth and customer growth. Additionally, our total customer base exceeded 330 million by year-end. The maturation of Chinese consumers' coffee-drinking habits and increased coffee consumption frequency form the foundation for our long-term sustainable growth.
2. Rising Raw Material Costs: Material costs increased 10% YoY to RMB 3.8 billion, but as a percentage of total revenue, they decreased from ~50% in the same period of 2023 to 40% (this improvement was driven by our stronger supply chain advantages and product mix changes), contributing to gross margin expansion. However, rising coffee bean prices may negatively impact this cost item in 2025, though the company expects to partially mitigate this through improved operational efficiency and economies of scale. Additionally, delivery costs per order declined due to enhanced economies of scale.
3. Improved Internal Operational Efficiency, Lower Expense Ratio. General and administrative expenses as a percentage of total revenue decreased from 8% in the same period of 2023 to 6.6%, reflecting efficiency gains from our larger operational scale; sales expenses increased 44% YoY to RMB 573 million, mainly due to continued strategic investments in brand building to strengthen customer engagement.
4. Highlights: Achieved double-digit operating margin in Q4—traditionally a slow season—for the first time, demonstrating our operational efficiency improvements. Additionally, same-store sales growth (SSSG) turned positive YoY in December.
2. Detailed Earnings Call Content
2.1 Key Executive Remarks
1. Overall Performance:
Same-store metrics for self-operated stores improved rapidly starting in Q2, reflecting notable efficiency gains. This indicates that the company has achieved steady growth through strategic focus and effective execution, further consolidating its market leadership. By focusing on three core pillars—people, products, and locations—we have strengthened our competitive edge. Through expanding our store network and customer base, we have further increased Luckin’s market share.
2. Store Expansion:
Domestic Stores: Maintained industry-leading store expansion speed in 2024, with over 6,000 net new stores opened for the year, bringing the total store count to 22,340 by year-end. We believe that as Chinese consumers develop coffee-drinking habits, demand will grow steadily in terms of both customer base and per capita consumption, creating opportunities to increase store density in high-tier cities and further penetrate lower-tier markets.
International Stores: Added 6 new stores in Singapore, bringing the local total to 51. In January, we officially entered the Malaysian market for the first time via a franchise model, opening 2 initial stores. In relatively mature international coffee markets, the company will adopt flexible, tailored operational models to accumulate overseas experience while exploring new market opportunities.
3. Product Innovation & Customer Growth:
New Product Launches: Leveraging strong R&D capabilities, we introduced a series of popular new coffee products, expanding our beverage lineup. In the reporting quarter, we launched 18 new drinks and multiple other products, with 119 new SKUs for the full year. For example, the Butter Latte launched in late September 2024 quickly became Q4’s second-best-selling product after the signature Coconut Latte; the Apple C Americano launched in Q4 also performed well, building a loyal customer base.
Customer Growth: Through compelling products and attractive collaborations, we continuously attract new customers and boost engagement. Q4 added over 25 million new customers, with average monthly transacting customers exceeding 77 million. For full-year 2024, over 100 million new transacting customers were added, with cumulative transacting customers exceeding 330 million by year-end—laying a stronger foundation for future growth. Average monthly transacting customers grew 48% YoY to 71.8 million.
4. Supply Chain & Partnerships: In Q4, we deepened our strategic partnership with Brazil’s FX Brazil, signing a new memorandum to double coffee bean procurement volume from 120,000 tons over the past two years to 240,000 tons over the next five years, ensuring stable high-quality supply from upstream regions and building a solid global supply chain foundation. Leveraging our value chain advantages, we optimized partner subsidies and reduced raw material markups to foster industry win-win development, empowering partners to share in growth while enhancing our influence and leadership.
2.2 Q&A
Q: Can you break down SSSG into price and volume factors? What are management’s expectations for SSSG in 2025?
A: Overall, SSSG fluctuations in recent quarters were in line with expectations, and Q4’s continued improvement aligns with our market communications. Since 2023, China’s coffee market has grown rapidly but competition has intensified. We strategically accelerated store expansion to gain share. As stores require time to mature and customer habits take time to develop, SSSG experienced short-term volatility—consistent with our strategic outlook. For 2025, we will further strengthen our industry leadership; economies of scale and cost/efficiency advantages will become more pronounced, and we are confident in further improving SSSG. Short term, we will leverage our extensive store network to attract more customers via product innovation, category expansion, and effective marketing; medium-to-long term, China’s coffee consumption is still in early stages—rising frequency and per capita consumption will naturally drive future SSSG growth. Q4’s SSSG improvement stemmed from strong execution of our store expansion strategy. Pricing remained stable YoY in Q4, while cup sales improved due to growing demand. Daily cups per store in December 2024 exceeded December 2023, driving positive SSSG that month. For this year, we expect pricing to remain stable YoY, with daily cups per store rising steadily as more self-operated stores mature, supported by more high-quality coffee options and attractive experiences—further driving overall SSSG improvement.
Q: With recent sharp rises in coffee bean prices, how do you assess the impact on the company? What measures will you take to address this, including potential price hikes?
A: Rising coffee bean prices have drawn industry and market attention, creating cost pressure, but we expect to partially mitigate this through our strong supply chain and full-value-chain investments. Our scale and efficiency gains can buffer this pressure, and the impact remains manageable. We have invested across the coffee value chain, covering procurement, import/export, processing, and retail operations. In November, we deepened our partnership with Brazil’s Apex, signing a new memorandum for 240,000 metric tons of coffee beans over five years—ensuring stable high-quality supply. With our own roasting facilities, we expect annual roasting capacity to reach 100,000 tons by year-end, providing stable, cost-effective supply. We currently have no plans to raise prices and will continue promotions to cultivate coffee habits, offering high-quality experiences at competitive prices. As an industry leader, we will work with partners to pass on positive effects of price rises, promote sustainable trade, and drive long-term industry success.
