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Luckin Coffee’s Impressive Growth and Retail Model Could Dethrone Starbucks in China

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Luckin Coffee News

If you don’t know Luckin Coffee (NASDAQ:LK), let us help you: it’s Chinese Starbucks (NASDAQ:SBUX) that is posing quite a headache to Starbucks Corporation in China. But more importantly, it is China’s fastest-growing coffee entreprise. On Wednesday, the company surprised investors with yet another quarter of boiling growth, although its bottom-line losses persevered. But Luckin Coffee’s third investors overall delighted investors as its shares spiked 13% consequently.

Third quarter

To give you a better idea why investors were so delighted, we will compare the latest figure with the same quarter last year. Prepare to be amazed as revenue increased 640% as it reached $215.7 million. Revenue from product sales exceeded the high end of management’s forecast range with the average number of monthly transacting customers spiking 398% to 9.3 million. Net revenue from freshly-brewed beverages amounted to $160.2 million, representing 74.3% of total revenue during the quarter. This is a drop comparing to same quarter last year when it reached 80% but this is expected as the company is building its non-coffee portfolio with baked goods and also its newly launched Luckin Tea brand. And we know China is a tea-drinking market.

Persevering but improved loss

Unfortunately, the company’s loss also increased by 9.6% and amounted to -$74.4 million, with the diluted loss per share being – $0.04. But there were quite a lot of investments as the store count increased by 210% to 3,680 stores. And more importantly, the company’s net loss increased at a far slower rate than revenue and even improved sequentially comparing to the previous, second quarter of the year. Not to be neglected is also the fact that Luckin Coffee decreased its delivery costs by opening all those new stores, with delivery sales now accounting to 3.1% of total revenue as opposed to 5.7% in the same quarter last year.

Competition

Perhaps the most unique feature Luckin Coffee just revealed is its business model extension. Although it is similar to a traditional franchise offered by its competitors, Lucking introduced its very own version of a so called ‘retail partnership model’. Like in a franchise, the new partner is in charge of space, staff hiring and every day store operations while gaining the benefits of Luckin’s brand, cashier-less mobile ordering and payments, as well as the supply chain. But the partner won’t be required to pay an initial franchise fee, removing pretty much the biggest obstacle to all those interested parties as they will only share their revenue on a tiered basis. This ‘asset-light expansion model’ enables Luckin’s partners to invest more in the business’ early stages but also provide Luckin with greater revenue once sales start to increase. With less capital at risk, this model should trigger an even faster store growth.

But to be realistic, the company still has a way to go in matching its greatest rival Starbucks which has a global presence around the world, with the market cap of nearly $100 billion. But then again, Luckin is making way in a key market for Starbucks and aiming to dethrone Starbucks in China by the end of the year. Starbucks needed almost two decades to reach 4,125 stores in China whereas Luckin now already has 3,680 with this quarter’s additions that nearly tripled the operational costs. Luckily for Luckin, that declined due to reductions led by its app-focused model. But the fact is Luckin still needs to find a way to become profitable.

Outlook

If Luckin can again substantially scale its top line while continuing to improve its losses, it may yet win another round of during its next quarter as well. The company’s shares have now climbed more than 59% since the company went public in May. But this quarter resulted in Friday’s stock surge making Luckin’s market cap at $6.4 billion, and made its chairman Lu Zhengyao into a billionaire, with its the fortune being estimated at $2.26 billion.

This article is contributed by IAMNewswire.com. It was written by an independently verified journalist and is not a press release. It should not be construed as investment advice.

Press Releases – If you are looking for full Press release distribution contact: press@iamnewswire.com

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BenzingaEditorial

Bed Bath & Beyond’s Stock Plunges With Hard Times on the Horizon

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On Wednesday, January 8, third quarter earnings and revenue miss caused the share price of Bed Bath & Beyond Inc (NASDAQ:BBBY) to plunge 8 percent with the retailer withdrawing fiscal 2019 outlook. On Thursday, stock was down 11 percent in premarket trading.

Third quarter earnings

Oh, how the mighty have fallen seems as the appropriate phrase to describe net earnings from of $24.4 million from one year ago dropping to a net loss of $38.6 million. Refinitiv expected earnings of 2 cents whereas the retailer delivered an adjusted loss per share of 38 cents. Revenue dropped 9 percent and amounted to $2.76 billion with same store sales dropping 8.3 percent versus the 5 percent expected. Both sales and profitability are expected to remain under heavy pressure in the fourth quarter as well. The retailer found that its results were significantly impacted by the fact Thanksgiving fell later than usual, resulting in one week less of holiday sales.

Tritton’s shakeup

On Monday, the retailer announced that it accomplished a real estate deal that netted the company $250 million in proceeds, what according to Tritton is the first step towards unlocking valuable capital. And only in December, Tritton decided to let six senior executives go and is currently in the recruitment process for their roles. Bed Bath and Beyond’s turnaround strategy is well underway with these swift changes but surely, there are many more to come as some of these executives have been with the company for more than 20 years – so “out with the old, in with the new” it is.

Intense competition

Amazon (NASDAQ:AMZN) has vigorously shaken up the retail landscape, but Target Corporation (NYSE:TGT) and Walmart Inc (NYSE:WMT) are by no means, left behind, but are in fact doing beyond great as they are successfully luring customers with more attractive websites and speedier shipping. And all of them are selling pretty much all the products that Bed Bath & Beyond has in store, leaving the struggling company in quite a turmoil.
But Amazon is by no means still the emperor sitting on the e-commerce throne as it is literally bleeding out to retain its crown. The world’s biggest online stores is losing money on its sales in order to achieve its shipping policy and in the world of ‘free-shipping’, it seems it could soon be beaten by Walmart, world’s third largest store but America’s largest retailer. And it is growing fast into online retail with its online sales exploding 78 percent up since 2016, but more importantly, now growing twice as fast as Amazon. And here’s the trick, Walmart is using its physical stores as warehouses for online sales. And since these stores are already turning a profit, maintaining extra warehouse space is nothing but a small addition to costs and that makes its strategy far different. Amazon only has 110 warehouses across the US so Walmart will soon have the biggest and more effective shipping network. Although both have great growth potential, Walmart is going full speed ahead in the online retail wars. Not good news for Amazon and especially for poor old Bed Bath & Beyond.

Outlook

CEO Mark Tritton, a Target veteran who started commanding the ship in October has announced that strategic plans for creating a long-term profitable growth will be revealed within the next two months, showing his discontent with these unsatisfactory results which are more than an imperative for change of the current business model. Bed Bath & Beyond desperately needs a new vision and hopefully, Tritton will be able to deliver it, otherwise things could get even worse.

This article is contributed by IAMNewswire.com. It was written by an independently verified journalist and is not a press release. It should not be construed as investment advice.

Press Releases – If you are looking for full Press release distribution contact: press@iamnewswire.com

Contributors – IAM Newswire accepts pitches. If you’re interested in becoming an IAM journalist contact: contributors@iamnewswire.com

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BenzingaEditorial

Walgreens Isn’t Getting Closer to Turning Sickness to Health

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Walgreens News

Walgreens Boots Alliance (NASDAQ:WBA) reported its first fiscal quarter earnings on Wednesday, January 8 before the market opened. Its profits were harmed by increased competition from online and discount retailers, resulting in less prescriptions. Despite the slow start of 2020, the company hopes to be one of the rare survivals of the intense shakeout that is upon the pharmacy sector and is expected to wipe out thousands in the years to come.

Earnings report

Wall Street expected $34.6 billion in revenue and earnings per share of $1.41. And results fell short of expectations with revenue of $34.34 billion. Net profits declined sharply, 25 percent to be exact to $845 million for the period ended November 30th, 2019. Despite rumours that that the global pharmacy chain could be taken private in a massive leveraged buyout but Chief Executive, Stefano Pessina, didn’t address this speculation but rather emphasized that the company is making a progress in reinventing new services and digitizing its drugstore chain. The company is investing hundreds of millions of dollars in this reinvention while under a massive cost management program. And at least sales went up 1.6 percent. But the weak pharmacy spots cost its shares a consequent fall of 7 percent after the earnings report and even dragged those of rival CVS Health Corporation (NYSE:CVS) down 2 percent as investors are concerned that the pressures on reimbursement rates from insurers is likely to make further damage to profits.

Miserable 2019

The pharmacy and retail company ‘won’ the award of worst performer for 2019 when it comes to Dow Jones Industrial Average. S&P gained 27% over the last 12 months whereas Walgreens fell 16 percent. During this everything but memorable fiscal year, Walgreens sales grew just 4% and earnings per shares were down from fiscal 2018.

Along with its rival CVS Health Corp., Walgreens is managing to help itself somewhat by benefiting from many closed up pharmacies and acquiring their customers and consequently, their prescriptions. But, Walgreens itself has closed some of its stores as the company announced in August it will close an additional 200 stores to the already announced shutdown of 750 stores. But Walgreens’ strategy is different to of its rival that aims to attract customers with lower cost personal care items and primary care services. Yet, Pessina is more than confident in Walgreens’ strategic partnership approach, which most recently included expanding its relationship with The Kroger Co (NYSE:KR) in order to include a new group purchasing organisation and simply, cushion the impact from all those blows.

Outlook

The two strong headwinds that have hampered the company—the falling reimbursement rates insurance companies pay for prescription drugs and the struggles of its retail business aren’t going to change direction anytime soon. Giants known as insurers are pressuring pharmacies on margins and Amazon.com Inc (NASDAQ:AMZN) along with many other digital competitors are already doing a great job in luring customers. Surely, Walgreens cannot be saved by LED lighting that will save money, which was mentioned by one of its executives during the conference call, but long-term, maybe a very long and severe flu season can help Walgreens in turning its own sickness into health. Yet, Wall Street remains sceptical. Since news broke in November about a possible LBO, the pharmacy chain has now lost all the gains it made since then. One thing is for sure, whoever you are, if you are anywhere near being a pharmacy, it is a very difficult place to be at.

This article is contributed by IAMNewswire.com. It was written by an independently verified journalist and is not a press release. It should not be construed as investment advice.

Press Releases – If you are looking for full Press release distribution contact: press@iamnewswire.com

Contributors – IAM Newswire accepts pitches. If you’re interested in becoming an IAM journalist contact: contributors@iamnewswire.com

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BenzingaEditorial

Xerox Continues Pursuit of HP by Showing the Money, $24 billion That Is

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Xerox News

On Monday, Xerox Holdings Corp (NYSE:XRX) revealed a financing commitment with the aim to ease concerns that it is unable to fund its HP Inc (NYSE:HPQ) buyout proposal. In order to remove any doubt and prove it is capable to take over its much larger rival, Xerox secured binding financing commitments worth $24 billion from Citigroup Inc (NYSE:C), Mizuho Financial Group Inc (NYSE:MFG) and Bank of America (NYSE:BAC).

The Takeover Saga

Xerox has a market cap of $8 billion whereas HP’s kingdom is valued at $30 billion but this isn’t the common ‘big fish eat little fish’ scenario. The $33.5 billion takeover bid was daringly offered by Xerox in early November. This cash-and-stock offer was rejected twice HP who felt that $22 per share is not in the best interest of its shareholders and furthermore, that it significantly undervalues their company. When the executives rejected the proposal yet again in late November, they criticized Xerox’s aggressive approach and questioned its 10 percent decline in revenue since last year, further showing concerns about Xerox’s financial abilities to pursue this merger. But Xerox has now shown publicly its capability to pursue this value enhancing opportunity. And although profitable for now, when it comes to printing, earnings are dropping year after year as both companies are struggling and spinning off different ventures in order to leave this aging business behind. According to Xerox, this deal would save both companies $2 billion in costs over the next two years and would boost revenue for $1.5 billion over the next three years.

Outlook

Xerox strongly believes that this union would result in valuable synergy to both parties: increasing the addressable market as well as shareholder returns, ease debt and drive innovation that both companies desperately need to survive in the new era as the printing business continues to age. Moreover, Xerox also finds that it is strong in areas where HP has key market gaps, such as managed services. It obviously presented its value-creating case successfully to the big banks, winning their vote of confidence. But what will it take to win over HP? Now that the major concern is resolved, some shareholders might rethink Xerox’s proposal. But here’s an even bigger question. If successful, what does Xerox intend to do with HP’s PC business which accounts for the majority of HP’s revenues, and moreover, why does it want to get further into not only one but two markets that are slowing down? Or maybe Xerox knows something about printing and PCs that we don’t and this very same reason could also be behind HP’s self-confidence. But Xerox has now shown the money and the ability to get its agenda though so this saga is far from over.

This article is contributed by IAMNewswire.com. It was written by an independently verified journalist and is not a press release. It should not be construed as investment advice.

Press Releases – If you are looking for full Press release distribution contact: press@iamnewswire.com

Contributors – IAM Newswire accepts pitches. If you’re interested in becoming an IAM journalist contact: contributors@iamnewswire.com

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