Luckin (Minutes): Same-store growth in the fourth quarter and 2026 will face certain pressure.

Below is the summary of the 3Q25FY earnings call minutes of Luckin Coffee $Luckin Coffee(LKNCY.US) organized by Dolphin Research. For the earnings report review, please refer to "Luckin: Profit 'Squat' Just for a Better 'Jump'"

I. Review of Core Information from the Earnings Report

II. Detailed Content of the Earnings Call

2.1 Core Information from Executive Statements

1) The company emphasized that the Chinese coffee market is still in a rapid expansion phase, and the scale-driven strategy continues to achieve significant results, with strong growth in both third-quarter revenue and same-store sales.

2) Competition from delivery platform subsidies has caused traffic disturbances, but the company still maintains healthy profitability, with an operating profit of approximately 1.8 billion yuan. The current industry is experiencing challenges such as changes in delivery subsidies, rising raw bean costs, and seasonal off-peak periods. The company will continue to strengthen its operational and digital capabilities to cope with fluctuations.

3) Product innovation continued to advance in the third quarter, with nearly 13 new products launched and an "origin" themed event to strengthen the association between a healthy lifestyle and origin culture. Many new products received positive feedback, and the non-coffee series performed outstandingly, with some popular items accumulating sales of over 200 million cups, demonstrating the company's innovation and category leadership capabilities.

4) The company continues to promote ESG and public welfare actions, cooperating with the Red Cross Foundation to advance health projects for children in origin areas and continuously supporting local disease screening projects.

2.2 Q&A

Q: In the past two quarters, delivery subsidies have significantly boosted revenue but compressed profit margins. Is the marginal weakening of subsidies in the fourth quarter a seasonal phenomenon or a structural change, and will it continue into next year? How does the company view the impact of delivery subsidies on same-store growth next year in the context of a high base?

A: The impact of subsidies should be understood from the perspective of the coffee business model and industry trends: Coffee is essentially a "store-driven + local consumption" business, and long-term self-pickup will be the mainstream scenario, with delivery being only a supplementary channel. Delivery fulfillment costs are much higher than the mainstream freshly brewed coffee price range, making it extremely sensitive to single-cup pricing and having weaker unit economics. Longer delivery times also weaken immediacy and flavor experience, making it a suboptimal choice. Luckin's high-density store network centered on self-pickup constitutes a long-term competitive advantage. This year, delivery platforms invested heavily in subsidies early on, boosting overall orders and Luckin's user base, forming a high year-on-year base. Management expects platforms to shift to more refined, ROI-oriented operational strategies next year, gradually reducing subsidy intensity and prioritizing brands with high order density, strong fulfillment efficiency, and high subsidy conversion rates. Luckin is expected to continue to be the preferred partner. However, under the dual background of a high base and subsidy contraction, same-store sales growth will face certain pressures. The company will focus on long-term development, continuously strengthening product and brand power, and tapping into customer consumption potential, rather than relying on short-term subsidies as the main growth driver.

Q: In the context of changing competitive landscape and fluctuating external environments such as delivery platform subsidies, how will the company balance store expansion, same-store sales growth, and profitability in its long-term strategy?

A: Management stated that they will balance scale, same-store growth, and profitability over a longer cycle: The Chinese coffee market is still in a high-growth phase, and the strategic focus remains on expanding scale and market share, solidifying the long-term foundation through steady store expansion and building an efficient and high-quality network. For same-store growth, the company insists on "store quality first," leveraging a mature operational system and continuous product and brand innovation to enhance repurchase rates. However, due to factors such as subsidy decline, same-store growth will face certain pressures in the fourth quarter and even next year. In terms of profitability, the increase in delivery proportion and high coffee bean prices will compress profits in the short term. The company will optimize cost structure through refined operations, digitalization, and supply chain management, striving to maintain healthy and sustainable profitability during the expansion period.

Q: Regarding capital market layout, the company previously mentioned at the Entrepreneur Conference that it plans to carry out related operations on major US exchanges. What are the latest developments in this plan, and how is the overall capital market strategy arranged?

A: Since its establishment, Luckin Coffee has always received comprehensive and strong support, especially after the financial incident in 2020. With the continuous support and guidance of relevant parties, the company has maintained strong performance and successfully turned profitable. Regarding the question of advancing related operations on major US exchanges, the company reiterated its "commitment to the US capital market," but has not yet set a specific timetable or plan. The current primary task remains to focus on strategic execution and business development, seizing the long-term growth opportunities in the Chinese coffee market, expanding market share, and creating sustainable long-term value for shareholders.

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