American depositary receipts of Chinese coffee-retail giant Luckin Coffee (LK) plunged on Wednesday after the company posted second-quarter results better than year-ago numbers on stronger sales of its coffee and other specialty items, though below what analysts were expecting.
The so-dubbed Starbucks of China posted a non-GAAP loss of $89 million, or 48 cents per ADR, wider than the 43 cents that analysts polled by FactSet had been expecting. Revenue for the quarter was $134.2 million, above analysts' forecasts of $133.1 million.
Established in 2017, Luckin is the second-biggest coffee chain in China after Starbucks (SBUX - Get Report) . As of June, it had opened 2,963 stores across 28 cities, with 593 of those stores opened in the second quarter. The company is aiming to have 4,500 stores throughout the country by year-end.
"At the same time we have substantially reduced our store operating loss as a percentage of net revenues as a result of benefits of scale and increased bargaining power, operating efficiency from technology, and higher store throughput, and we are on track to reach our store level break-even point during the third quarter of 2019," CEO Jenny Zhiya Qian said in a statement.
Analysts and investors remain skeptical of the company's prospects, however, given the overwhelming dominance of tea as the preferred hot beverage of choice among Chinese consumers.
However, Luckin has a drink for that: Its new freshly brewed "Luckin Tea" drinks, which it said will "capture different consumption moments and benefit from strong demand for freshly-brewed tea drinks in China."
Luckin Coffee ADRs were down 15.34% at $20.78 in early trading on Wednesday. The Xiamen-based company kicked off as a publicly traded company in May at an initial public offering price of $17.