Luckin Coffee Inc. (LKNCY.US) held its Q2 fiscal year 2026 earnings conference call. Total net revenue for the quarter reached 15.9 billion yuan, a 29% year-over-year increase, while GMV hit 18.4 billion yuan, up 30%. On a non-GAAP basis, operating profit was 2.4 billion yuan, up 26% year-over-year, with an operating margin of 15.1% (compared to 15.3% in the same period last year). Net profit stood at 1.8 billion yuan, a 23% increase, resulting in a net margin of 11% (compared to 11.6% last year).
The company added over 25 million new transaction customers in Q2, with average monthly transaction customers hitting a record high of over 110 million, a 23% increase year-over-year. By the end of the quarter, cumulative transaction customers approached 500 million. Management noted that the company opened over 5,000 new stores in the first half of the year, an industry-leading expansion pace. As of the end of Q2, its global store count was 36,310, a 39% increase year-over-year, ranking first in the industry for both scale and expansion speed. In China, the company added 2,668 net new stores in Q2, bringing the total to 36,087, including 23,625 self-operated stores and 12,462 franchise stores.
The Chinese coffee market remains in a high-growth phase, driven by increased penetration rates and higher consumption frequency. The company leverages its digital capabilities to precisely identify demand, using data-driven store construction and intelligent store operations. This approach maintains store quality while improving expansion efficiency and operational consistency. Internationally, the company added 46 net new stores in Q2, bringing the total international store count to 223, comprising 89 self-operated stores in Singapore, 20 self-operated stores in the United States, and 114 franchised stores in Malaysia. The overseas strategy focuses on "prudent expansion," prioritizing product adjustments based on local consumer preferences, optimizing single-store economic models, and developing standardized, replicable operational methods to lay the foundation for future expansion.
Management expressed "cautious optimism" about H2 performance but did not provide specific revenue or store opening guidance. For Q3, due to the particularly intense delivery subsidies in July and August of the previous year, the high base effect is expected to persist, with same-store sales continuing to face pressure. However, profit margins are expected to improve, supported by the ongoing decline in the delivery order mix from its Q3 peak last year and improved fulfillment efficiency.
Q&A Session
Question: Q2 same-store sales and profit margins significantly outperformed the industry. Considering the high base in July and August, what are the trends for H2 same-store sales? With the delivery mix returning to normal, what is the outlook for profit margins and profitability?
Answer: Since the beginning of the year, competition on delivery platforms has gradually returned to a more reasonable level. The freshly made beverage industry is also moving towards a healthier and more sustainable development stage. Market competition has re-entered areas where the company has long invested and built advantages: product innovation, operational efficiency, and consumer value creation. Externally, the pace of delivery subsidy reduction has been faster than initially expected, making the pressure from the high base created by last year's strong subsidies more pronounced. This has already been reflected in the Q2 same-store sales performance. For Q3, the high base effect is expected to persist due to the particularly intense platform subsidies in July and August of last year. At the same time, profitability and profit margin trends are improving, supported by the ongoing decline in the delivery order mix from its Q3 peak last year and internal improvements in fulfillment efficiency. Internally, the company has continuously optimized various product and operational initiatives this year, with good results. Examples include the topping upgrade initiative and the small butter Americano product innovation mentioned earlier. These not only enhance the customer experience but also support the overall average selling price and cup volume. Overall, the company maintains cautious optimism about H2 performance. It will continue to adjust strategies based on changes in market conditions and consumer demand, balancing long-term growth opportunities with margin improvement, pursuing higher quality and more sustainable growth.
Question: With many peers slowing store openings this year and industry same-store sales generally under pressure, what is the priority for Luckin's faster store expansion? What is the store opening plan for H2 and the outlook? How do you balance store openings with same-store sales? What is the long-term store opening potential in China?
Answer: First, the company reiterates its strong confidence in the long-term growth potential of the Chinese coffee market. Compared to more mature global coffee markets, coffee consumption in China is still in the early stages of habit formation, with significant room for improvement in both penetration rate and consumption frequency. This long-term market opportunity is the foundation of the high-quality scale growth strategy and a key driver of continued expansion, meaning there is still ample room to open new stores while maintaining store quality. As coffee consumption becomes increasingly a daily habit for Chinese consumers, the company has built a nationwide store network covering all city tiers and diverse consumption scenarios. This includes everything from first-tier cities to county-level markets and townships, covering office buildings, shopping districts, street-side locations, residential communities, campuses, and transportation hubs. This network continuously improves consumer accessibility and strengthens the company's brand perception as a national professional coffee brand. For Luckin, store expansion is not just about increasing the number of locations. More importantly, it leverages the nationwide store network, brand assets, and product capabilities to better identify and serve growing customer demand. This is supported by a highly scalable and replicable operational model covering the entire value chain of "people, goods, and places." From demand insight and site selection to store construction, operations, and continuous optimization, digital capabilities and AI technology are used to enhance decision-making efficiency. Mature organizational capabilities and execution ensure fast store openings while maintaining store quality and continuously improving individual store performance. At the same time, the expansion of the store network further strengthens brand influence and enhances the scalability of product innovation, creating a positive cycle between stores, products, and customers. Therefore, store expansion is not an end in itself, but a key foundation for sustainably capturing market share. The conclusion is that store growth in the Chinese coffee market still has considerable potential. As coffee penetration and consumption frequency continue to rise, the overall market capacity will continue to expand. The company is confident in maintaining a competitive store opening pace to seize the long-term growth opportunities in the Chinese coffee market and continue to increase its market share.
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