Luckin Coffee, facing NASDAQ delisting, slows expansion

By Qi Xijia Source:Global Times Published: 2020/6/29 16:48:43

A view of Luckin Coffe in Guangzhou, capital of South China's Guangdong Province in December. Photo: VCG



Luckin Coffee, a Chinese homegrown rival to Starbucks, is still in operation, although the firm has slowed its aggressive expansion since the start of the year, seeing an 80 percent plunge in new shop openings now from last year. 

Luckin's American Depositary Shares are to set be suspended from trading on the NASDAQ at opening on Monday, after the company on Friday announced it was giving up plans to appeal NASDAQ's decision to delist the company over a serious financial fraud scandal.

Launched in 2017, the chain set out to challenge Starbucks in China through an app-based purchasing model and lashing out generous mobile coupons. At its peak, its number of branches even surpassed that of Starbucks. 

Yet its expansion slowed down after explosive development in 2018-19. In total 1,800 branches were registered under the "Luckin Coffee" brand in 2018, rising to 2,000 in 2019. However, only 186 branches have been added in 2020, an 80 percent drop from the same period last year, data from company register information website Tinayancha showed.

"The operations of more than 4,000 stores across China will continue," said the Chinese coffee startup in a statement on Saturday.

The Global Times visited several Luckin stores in Shanghai and retail operations in the shops did not seem to be affected.

"Customer flows have not been affected by the delisting," an employee of a store in Shanghai's Jing'an district told the Global Times on Monday. At lunchtime a few orders were seen waiting to be picked up and Luckin's app is still working. 

The delisting is not likely to affect Luckin's business operations, food industry expert Zhu Danpeng told the Global Times on Monday.

"Luckin Coffee has cultivated its brand, providing cost-effective coffee and retaining a large pool of customers. Given the impact of the coronavirus, the cost-effective route will be more popular among customers. The 4,000 outlets should be able to provide sufficient cash flow for the company," Zhu said.

Fang Fang, a regular customer of Luckin Coffee, told the Global Times he has been aware of the scandal but it will not affect his decision to frequent the brand's branches.

"As long as it keeps up the current quality and discounts, the delisting will not affect my purchases," he said.

Luckin Coffee was listed on NASDAQ on May 17, 2019, and received two notices from NASDAQ warning its failure to adhere to listing rules.

The stock fell 54 percent to close at $1.38 with a market value of $348 million on Friday.

"If it can raise new capital in the future and settle compensation with investors, don't rule out the possibility that Luckin Coffee will seek a second listing," Zhu said.

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