Luckin Coffee's Profit Margin Shrinks Despite Revenue Surge Amid China's Delivery Platform Wars
Luckin Coffee reported a 50% year-on-year revenue increase to RMB 15.29 billion (US 2.11 billion) in the third quarter of 2025, yet net profit declined 1.9% in the third quarter of 2025, as the Chinese coffee chain grappled with surging delivery costs triggered by an intensifying e-commerce battle for food delivery market share.
The results highlight how the three-month delivery platform war launched by Alibaba, JD.com, and Meituan since summer 2025 has become a double-edged sword for coffee and tea brands. While the campaign drove customer traffic and pushed Luckin's store count to a record 29,214 locations, operating profit margin contracted to 11.6% from 15.5% a year earlier.
Delivery fees surged 211% to RMB 2.89 billion (US$399 million) in the quarter, accounting for 18.9% of total revenue compared to 9.1% in the prior year. The margin compression raises questions about the sustainability of delivery-driven growth for China's quick-service coffee chains as platform subsidies taper.
CEO Guo Jinyi acknowledged that Luckin views delivery as "a supplementary phase" and expects the business to return to a self-pickup model, warning that same-store sales growth will face challenges in 2026 as platform incentives diminish.
Rapid Store Expansion Drives Revenue Growth
Luckin added 3,008 stores in the third quarter, bringing its total network to 29,214 locations—an 11.5% quarter-on-quarter increase. The chain operated 18,882 company-owned stores and 10,332 partnership stores as of September 30.
Chairman Li Hui, founder of Centurium Capital, told China Entrepreneur magazine that the company had accelerated expansion beyond its initial 2025 plan to capitalize on the delivery platform war. Monthly transacting customers reached a record 112 million in the third quarter, while gross merchandise value climbed 48.1% to RMB 17.3 billion.
Revenue from company-owned stores rose 47.7% to RMB 11.08 billion, while partnership store revenue jumped 62.3% to RMB 3.79 billion. The store expansion played a central role in driving product sales volume higher.
Delivery Costs Erode Profitability
Operating profit margin for company-owned stores fell to 17.5% from 23.5% a year earlier, primarily due to delivery-related expenses. The sharp rise in delivery fees reflected increased order volume through third-party platforms offering heavy subsidies to consumers during the delivery war period.
Sales and marketing expenses also increased 27.5% to RMB 751 million from RMB 589 million, driven by higher commissions to third-party delivery and livestreaming platforms. The combined effect resulted in net profit of RMB 1.28 billion, down from RMB 1.31 billion in the third quarter of 2024.
Guo stated that delivery fulfillment costs remain misaligned with China's mainstream coffee pricing, and that delivery time affects both demand and product quality. He indicated that as platform subsidies recede, the company expects to face same-store growth pressure in 2026.
No Timeline for US Main Board Relisting
Guo addressed speculation about Luckin's potential return to a major US stock exchange, stating the company has "no clear timeline" for relisting on a main board. Earlier in November, Guo had indicated at a Xiamen business forum that Luckin was actively pursuing a return to US main board trading.
Luckin was founded in 2017 and listed on Nasdaq in May 2019, but was delisted in 2020 following an accounting fraud scandal that resulted in approximately US$180 million in penalties. Guo noted that after comprehensive internal and external investigations, the original shareholders and management team involved in the scandal have completely exited, with new controlling shareholders and management now in charge.
The company projects full-year 2025 revenue will exceed RMB 50 billion (US 6.9 billion) and total tax payments will surpass RMB 1.7 billion (US 235 million). Luckin now ranks as China's largest coffee chain by store count and has entered the list of China's top 500 private enterprises for the first time.
Chairman Li Hui declined to comment on market speculation that Centurium Capital is considering a bid for Costa Coffee.