Luckin Coffee Inc. (LKNCY) Report Interpretation

Overview

This earnings review examines Luckin Coffee’s 2Q26 results, focusing on whether fast network expansion can coexist with resilient same-store performance and improving delivery economics. Goldman Sachs argues that the quarter strengthens confidence in second-half earnings and margin recovery.

Core views

Luckin reported a stronger-than-expected 2Q26. Revenue increased 29% year on year to Rmb15,886mn, 3% above Goldman Sachs estimates, while non-GAAP net profit rose 22% to Rmb1,753mn, 19% above estimates. GMV reached Rmb18.4bn, up 30% year on year and above the Rmb17.7bn estimate; average monthly transacting customers grew 23% to 113mn. Revenue from self-operated stores was Rmb11,564mn, up 27%, and partnership-store revenue was Rmb3,668mn, up 28%. The central operating question was whether accelerated store openings would dilute store economics. Total stores reached 36,310 at June-end after 2,714 net additions in 2Q26, ahead of Goldman Sachs’ estimate of 1,800 and above the prior quarter’s 2,548 additions. Self-operated same-store sales growth was -5.3% year on year, broadly in line with Goldman Sachs estimates, versus 13% growth in 2Q25; the report attributes the decline largely to a high comparison base and estimates self-operated revenue per store fell 11% year on year. Despite this, self-operated store operating margin was 21.3%, up 0.3 percentage points year on year and well above Goldman Sachs’ 18% estimate. Goldman Sachs views the result as evidence that Luckin’s digital operating capabilities and replicable store model can support opening quality and ramp-up. Delivery economics were the major positive surprise. Delivery expenses fell 3% year on year, with the delivery-expense ratio declining 3.3 percentage points to 10.2%, 3.0 percentage points below Goldman Sachs estimates. The report links this to lower delivery cost per order from fulfillment efficiency and a modest reduction in delivery mix, supported by customers’ use of Luckin’s own platform and the convenience of its broad store network. Gross margin was 61.4%, close to the 61.6% estimate but below 63.1% a year earlier, reflecting lower ASP associated with delivery mix and subsidies as well as higher coffee-bean prices. The delivery-cost improvement nonetheless helped operating profit reach Rmb2,123mn, 22% above estimates. For the second half, management was cautiously optimistic but acknowledged that 3Q same-store sales growth faces a difficult comparison because delivery subsidies were intense in July and August of the prior year. Management expects declining delivery mix and better fulfillment efficiency to support margin recovery, while it plans to adjust operating strategy to market conditions and demand. Goldman Sachs shares the expectation of a second-half margin turnaround and believes the 2Q performance should improve investor confidence in second-half earnings growth. It also notes that delivery-platform competition has normalized faster than management initially expected, with subsidies being withdrawn and competition refocusing on products and customer value. Product initiatives are presented as support for ASP, volume and consumption occasions. Luckin launched 28 freshly brewed beverages and more than a dozen light-food products in 2Q26. Little Butter Americano ranked among the top two products by sales volume, with cumulative Little Butter series sales exceeding 500mn cups; Calamansi Americano sold more than 10mn cups in its first week. Non-coffee products represented five of the company’s 25 products with cumulative sales above 100mn cups by the end of 2Q26. Goldman Sachs raised 2026-28 non-GAAP net-profit estimates by 4%-6%, citing faster store additions, lower delivery costs from mix decline and efficiency gains, and a lower-than-expected tax ratio. The updated target price is US$51, up from US$49, based on an unchanged 21x 2026 P/E multiple. The report reiterates Buy.

Analysis framework

Goldman Sachs compares reported revenue, profit, operating metrics and cost ratios with its estimates, then connects store additions, same-store sales, delivery mix and fulfillment efficiency to margins and earnings forecasts. It updates estimates and derives the target price using a 2026 P/E multiple.

Methodology notes

• Valuation methodsP/E and PEG Valuation

  2026 P/E valuation

  Goldman Sachs sets the new US$51 target price using an unchanged 21x multiple on its 2026 earnings estimate.

• Industry AnalysisVolume-price decomposition

  Store expansion, same-store sales, delivery mix and fulfillment efficiency analysis

  The report evaluates growth and margin resilience by separating network growth and store productivity from delivery costs, product mix and pricing effects.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Luckin Coffee Inc. (LKNCY)

  Primary covered company; the report sees delivery efficiency, digital operations and store-network expansion as supporting earnings and margin recovery.

  Strengths

  Revenue and profit beat estimates; resilient 21.3% self-operated store operating margin; rapidly expanding network; lower delivery costs; product innovation.

  Weaknesses

  Self-operated SSSG was -5.3% year on year and revenue per self-operated store declined amid a high comparison base.

  Comparison

  Revenue was 3% above Goldman Sachs estimates, non-GAAP net profit was 19% above estimates, and store additions exceeded the 1,800 estimate.

  Risks

  Data privacy, competition, weaker pricing, coffee-bean cost inflation, delivery-mix effects on margin, store-expansion dilution of SSSG, and food safety.

Key data

• 2Q26 revenueRmb15,886mnUp 29% year on year and 3% above Goldman Sachs estimates.
• 2Q26 non-GAAP net profitRmb1,753mnUp 22% year on year and 19% above Goldman Sachs estimates.
• GMVRmb18.4bnUp 30% year on year versus Goldman Sachs estimates of Rmb17.7bn.
• Net store additions2,7142Q26 additions, ahead of Goldman Sachs estimates of 1,800; total stores reached 36,310.
• Self-operated SSSG-5.3%Year-on-year, broadly in line with estimates; affected by a high prior-year comparison base.
• Self-operated store operating margin21.3%Up 0.3 percentage points year on year and above Goldman Sachs estimates of 18.0%.
• Delivery expense ratio10.2%Down 3.3 percentage points year on year and 3.0 percentage points below Goldman Sachs estimates.
• 2026-28 non-GAAP net-profit forecast revision+4% to +6%Driven by faster openings, lower delivery costs and a lower tax ratio.

Impact & implications

Goldman Sachs believes the resilient store-level margin during rapid expansion and faster-than-expected delivery-cost improvement support a second-half margin recovery. The firm’s revised estimates and higher target price reflect increased confidence in earnings growth, while a high base remains a near-term headwind for same-store sales.

Risks

• Data-privacy risks.
• Intensifying market competition.
• Weaker-than-expected pricing.
• Raw-material cost inflation, including coffee beans.
• An adverse delivery-mix impact on margins.
• Same-store-sales dilution from store-network expansion.
• Food-safety risks.

What to watch

• 3Q same-store sales growth against a high prior-year subsidy comparison base.
• Whether delivery mix continues to decline and fulfillment efficiency continues to improve.
• The pace and quality of store openings as the network expands.
• The effect of larger-cup upgrades and new products on ASP and cup volume.
• Competitive conditions and delivery-platform subsidy normalization.