Luckin's Financial Report: Profit Pain Amid Rapid Growth and Strategic Shift

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During the 2026 Spring Festival, Luckin Coffee achieved an impressive holiday milestone: the number of transaction customers exceeded 40 million, a year-over-year increase of over 36%, setting a new high for the same period. “Drinking coffee for the New Year” has become a new trend. With a network of over 30,000 stores nationwide, especially in county markets, a consumption boom driven by returning young people has emerged.

However, just a few days later, the release of the Q4 and full-year 2025 financial reports revealed a more complex, even somewhat “polarized” picture. The reports show that Luckin achieved unprecedented scale expansion in 2025, but at the same time, rising costs are severely squeezing its short-term profitability.

This financial report is no longer just a performance summary; it resembles a “battle for efficiency” that has begun after China’s coffee market’s rapid expansion phase.

Luckin Enters a New Stage

In terms of absolute growth, 2025 was undoubtedly successful for Luckin. Total net revenue soared to 49.288 billion yuan, a 43.0% increase; net profit for the year was 3.6 billion yuan, up 21.8%.

The core engine driving this growth is the astonishing expansion of its store network: a net increase of 8,708 stores throughout the year, reaching a total of 31,048 stores by year-end, a 39% increase. Among them, revenue from franchise stores grew by 49.7%, faster than self-operated stores, confirming that its brand and model have been validated in lower-tier markets.

More importantly, the user base has been solidified. Luckin’s cumulative transaction customers have exceeded 450 million. This means that in China, about one in three people has shopped at Luckin.

Many industry analysts believe that Luckin’s scale effects are beginning to show, but cost control needs to improve simultaneously. As the coffee market moves away from price wars, growth relying solely on store expansion is unsustainable. Future success will depend on digital tools to optimize operations and enhance product premiumization, achieving both scale and profit growth.

For Luckin, scale expansion consolidates its market leadership and enhances its ability to seize “structural dividends.” This network effect, built on store density and user scale, has become its broadest and deepest moat, and the foundation for its nationwide consumption surge during the Spring Festival.

This financial report marks the end of one development phase and the beginning of another for Luckin Coffee. It moves away from relying on external subsidies and reckless price wars, entering a new cycle focused on “precision cultivation” through its own network density, brand recognition, and operational efficiency to pursue sustainable profitability. Market attention should shift from “How many more stores can it open?” to “How can it make these stores more profitable?”

Why Does Revenue Growth Not Translate into Profit?

However, behind the impressive scale, data from Q4 sounded an alarm. Revenue for the quarter increased by 32.9% year-over-year to 12.777 billion yuan, but net profit under US GAAP plummeted by 39.1% to 518 million yuan, with net profit margin halving from 8.8% to 4.1%.

Costs have become a giant devouring profits. Total operating expenses in Q4 reached 11.955 billion yuan, up 38.9%, far exceeding revenue growth. Most strikingly, delivery costs surged by 94.5%, reaching 1.631 billion yuan. Additionally, material costs, store rent, and other expenses grew by over 32%.

Behind these figures are two major pressures facing Luckin:

1. The explicit costs of declining delivery subsidies: In Q4 last year, delivery platforms reduced subsidies during the industry’s off-season. This led to a slight decrease in delivery order proportion but caused actual delivery costs to skyrocket, directly eroding profits.

2. The side effects of scale expansion: Opening new stores increases fixed costs like rent and labor, while marketing expenses to boost sales are also rising. Before full scale effects are realized, these costs are already impacting profits.

Against this backdrop, Luckin’s competitive strategy has undergone a fundamental shift. A notable event was its former main competitor, Cudy Coffee, voluntarily ending its “9.9 yuan for all” promotion, signaling the end of the initial price war phase based on losses for traffic. Luckin itself has also narrowed its discount scope.

In the future, Luckin’s competitive advantage will increasingly depend on “full-chain operational and systematic capabilities.” This phrase is crucial, indicating at least three changes:

First, the competition dimension has upgraded. Competition is no longer just about price or store count but encompasses supply chain, digital operations, product innovation, and brand experience efficiency.

Second, the growth engine has shifted from relying on external platform subsidies and aggressive pricing (“external leverage”) to internal digital tools that optimize costs, improve store labor efficiency, and enhance product effectiveness (“internal driving”).

Third, the focus is on pursuing more valuable growth. While maintaining a high cost-performance perception, Luckin will expand its price range with high-quality new products like “Terlensu exclusive farm latte,” to increase average customer spend and gross margin.

Challenges for Luckin in 2026

Looking ahead to the new year, Luckin’s path is clear but challenging. In the short term, due to the high base in 2025 and the pain of cost structure adjustments, same-store sales and profit performance may continue to be under pressure. The market will closely watch whether it can curb runaway costs, especially delivery expenses, through operational measures.

In the long term, Luckin already holds key cards for the next stage of competition: an unparalleled store network, a deeply ingrained brand, and vast user data. Its task is to convert scale advantages into sustainable profit advantages. This requires finding a new, more refined balance among scale, pricing, costs, and efficiency.

The 2025 financial report confirms the success of its scale expansion strategy with data but also exposes the fragility of profits under an extensive growth model. Now, the game has changed. Luckin is actively transforming from a “rapid expansion” team into a “systematic and sustainable profit-focused” force.

The second half of China’s coffee market has begun, with the theme shifting from “how many stores to open” to “how to make tens of thousands of stores more profitable.” This “efficiency battle” may be far more difficult than the previous “store opening war,” but it will determine whether Luckin can truly evolve from a business miracle into an outstanding company.