China’s Luckin Coffee Inc. (OTCMKTS:LKNCY) announced a revenue of RMB2.432 billion or US$381.7 million in Q4 2021. The revenue was an increase of 80.7% from the previous year.
The company also narrowed its GAAP operating loss to RMB120.8 million in the quarter, compared to RMB488.9 million loss in the previous year. Not only did the results come pleasing, but the company is expanding. It opened 353 net store outlets in the quarter to become one of the largest in terms of outlets in China with over 6,000.
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The financial results and expansion of Luckin Coffee should be a food for thought for a company founded just in 2017. Comparatively, Starbucks Corporation (NASDAQ:SBUX) has almost 34,000 stores, but has been in the market since 1971. Compared to the traditional retailers, Luckin Coffee takes a notch higher in technology application by offering app-based ordering and delivery.
Apparently, Luckin Coffee has been marred with controversy which led to its Nasdaq delisting. The delisting in June 2020 saw the stock shed more than 50%, with Nasdaq pointing to past failures of revealing material information. The Chinese regulators have raised the alarm over supplier payments, which added pressure to the company.
Nonetheless, Luckin Coffee is redeeming itself, with the recent results a testimony that it operates in a viable market and loyal customer base. Earlier this year, in mid-January, the Chinese chain reported that it was seeking to return to the US stock market.
The relisting happened amid ongoing growth while the company changed the management to please regulators. The improvements have also coincided with favorable stock movements.
LKNCY eyes break above $12 and $17
Technically, LKNCY faces resistance at $12.95 and higher at $17.78. The stock has tried to break above unsuccessfully. Still, it trades significantly higher from an oversold bottom of just above $1, coinciding with the improving sentiment.
Concluding thoughts
Lucking Coffee presents a growth story for investors looking for coffee chain alternatives to mature stocks such as Starbucks. If the stock manages to relist in the US again, it will instill new confidence in the market. The Chinese-US trade rivalry still presents a challenge for the young chain. The stock should be on the investors’ watchlist.
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