---
title: "LKNCY: Sales Up, Profits Lag — When Will the 'Little Blue Cup' Shake Off the 'Delivery Hangover'?"
type: "Topics"
locale: "en"
url: "https://longbridge.com/en/topics/40292462.md"
description: "Luckin Coffee announces first buyback"
datetime: "2026-04-29T14:48:05.000Z"
locales:
  - [en](https://longbridge.com/en/topics/40292462.md)
  - [zh-CN](https://longbridge.com/zh-CN/topics/40292462.md)
  - [zh-HK](https://longbridge.com/zh-HK/topics/40292462.md)
author: "[Dolphin Research](https://longbridge.com/en/news/dolphin.md)"
---

# LKNCY: Sales Up, Profits Lag — When Will the 'Little Blue Cup' Shake Off the 'Delivery Hangover'?

Luckin Coffee (LKNCY) released its Q1 2026 results (for the quarter ended Mar 2025) before the U.S. market open on Apr 29, 2026 Beijing time. Revenue held up well despite rapid store expansion, slightly beating estimates, but the old issue remains: a higher delivery mix continues to inflate fulfillment costs and cap margin release. **Luckin also announced its first-ever $300mn buyback.**$Luckin Coffee(LKNCY.US)

**1) Modest beat on headline results.** In Q1, Luckin delivered revenue of RMB 12.0bn, up 35.3% YoY, slightly ahead of the Street. **Growth was driven by store count expansion and increased monthly transacting users, not by same-store growth.**

**2) Store openings re-accelerated.** Luckin added 2,548 net new stores in Q1, bringing the total to 33,596, re-accelerating vs. Q4. **Company-operated net adds outpaced franchised, indicating continued densification in higher-tier cities**, **and underscoring management’s strategy of prioritizing share over profit.** Internationally, Luckin opened 17 new stores in Q1, primarily in SE Asia.

**3) SSSG turned negative.** As the core indicator of single-store organic growth, **same-store sales growth (SSSG) fell 0.1% YoY,** continuing the deceleration seen in 2H last year. **Dolphin Research believes the key drag came from lower delivery subsidies, which led to churn among price-sensitive users and pressured comps via cup volume,** while the full rollout of the '+RMB 3 upsizing to extra large' likely lifted ticket.

**4) Delivery costs remain the biggest margin headwind.** On GPM, while global coffee bean prices stayed elevated, **Luckin partially hedged cost pressure via origin direct sourcing and LT purchase agreements, and a higher mix of non-coffee beverages diluted the impact, keeping GPM flat YoY.** On opex, **delivery costs were the main drag, +48% YoY, with delivery as a % of revenue rising sharply to 10.9% from 7.8% a year ago.**Although down from the subsidy peak (~19%), it still sits above the 7–9% pre-delivery-war norm. Non-GAAP OPM was 7.5%, down 220bps YoY.

**5) First-ever $300mn buyback.** The BOD approved a one-year stock repurchase program of up to $300mn. **This first buyback signals that cash flow can now support shareholder returns alongside continued expansion.**

**Key operating metrics at a glance:**

**Dolphin Research’s take:**

With the delivery price war largely over, the platform-driven demand pulled forward by heavy subsidies over the past year is reverting to organic traffic. For Luckin, that comes with a cost.

Q4 monthly active paying users fell back to 98mn, +27% YoY, a clear slowdown from prior quarters, which already signaled the issue: **new users from the delivery war did not settle into Luckin’s private domain as much as hoped.**

Dolphin Research thinks this is intuitive: subsidy-acquired users are largely price-driven, and their loyalty to subsidies can exceed brand loyalty, so churn follows when subsidies fade. **This suggests Q1 2026 is a ‘water-squeeze’ phase — price-sensitive users churn, cup volume growth slows, but the remaining users are higher quality, with higher tickets and better profit contribution.**

For near-term results, the more important question is not an immediate rebound to high growth, but whether **Luckin can realign its profit model post-subsidy, and the sequential declines in delivery ratio in Q4 and Q1 indicate order mix is improving at the margin.**

Beyond subsidy normalization, competition in chain coffee keeps intensifying. In addition to Cotti’s ‘rural to urban’ push and tea chains like Gu Ming / Cha Baidao crossing into coffee, Starbucks’ deal closing in Apr (Boyu 60%, Starbucks retains 40%) implies a pivot toward more localized, efficiency- and expansion-oriented operations in China.

For Luckin, **Dolphin Research believes this may not immediately hit volumes, but could pressure medium-term upgrades in product, occasions, and brand tone in higher-tier cities.**

Against this backdrop, consider Luckin’s two recent strategic moves: the controlling shareholder Centurium Capital completed the acquisition of Blue Bottle Coffee, bolstering a premium specialty presence, **and** the formal launch of RTD bottled coffee.

Blue Bottle stands for specialty coffee mindshare, **meaning that if Luckin pilots ‘Luckin x Blue Bottle’ zones in core cities and enters the RMB 25–30 price band, it could address gaps in premium pricing and brand perception.**

The RTD bottled line is priced at RMB 6–7, covering core blockbusters like classic Americano, grapefruit-C Americano, and coconut latte, extending into supermarkets and convenience stores. **This both defends against ultra-low-price brands like Cotti and extends brand touchpoints from in-store freshly made to higher-frequency, broader daily retail occasions.**

**Connecting the two, Dolphin Research’s view: Luckin is evolving from a single freshly made coffee brand into a multi-price, multi-occasion beverage platform: RTD bottles defend the mass low-price base, the core brand anchors the RMB 10–20 mid-range, and Blue Bottle unlocks the premium specialty tier. The three-layer setup forms a full defense-and-offense system for intensifying competition.**

On valuation, the Street expects 2026 Non-GAAP net profit of ~RMB 5.2–5.3bn, implying ~12x 2026E. Despite an OTC discount for LKNCY, versus Dolphin Research’s projected 20–25% profit CAGR recovery over the next three years and the company initiating buybacks, the current level does not look stretched. A re-rating to ~15x would imply at least ~25% upside.

**The risk: Q2–Q3 2026 will lap the high base built during last year’s delivery war, making comps tough and likely capping the multiple. Position sizing should reflect individual risk tolerance.**

Details below

**I. Investment framework**

Per disclosure, Luckin operates two major lines: self-operated and franchised.

1) Self-operated represents revenue from company-operated stores. The self-operated base has surpassed 20,000 stores, concentrated in Tier-1/2 cities and critical for brand building. **Self-operated is the profit engine, contributing over 80% of total profit.**

2) Franchised revenue includes five parts: raw materials sold to franchisees (beans, milk, coconut milk), profit-sharing on franchise store margins (tiered by GM), equipment sales, delivery services, and other services. Raw materials account for nearly 70%, the core revenue driver for franchising. Franchise stores exceed 10,000, contributing ~20% of revenue, focused on lower-tier markets to secure prime locations, but profitability trails self-operated stores.

Notably, in Q1 2026 Luckin’s business boundary is already extending. Beyond freshly made self-operated and franchised coffee, two new directions merit watching: **RTD bottled coffee, and a potential premium specialty pilot leveraging Blue Bottle. While near-term revenue impact may be small, these matter for valuation as Luckin pursues brand-tier and occasion expansion beyond store model and opening speed.**

**II. Store opening re-accelerates**

Luckin added 2,548 net new stores in Q1, bringing total stores to 33,596, re-accelerating vs. Q4. **Company-operated net adds outpaced franchised, showing continued densification in higher-tier cities.**

Dolphin Research sees two key reasons for the Q1 acceleration: **coffee penetration is still rising fast, and the window for leaders to secure high-quality sites will not stay open long.** Management reiterated on the Q4 call that ‘gaining share remains the top strategic priority.’ With Cotti halting franchise in provincial capitals and some small brands exiting, **Luckin is pressing its advantage as peers retrench.**

As the core indicator of single-store organic growth excluding new-store effects, **SSSG fell 0.1% YoY, tracking a clear ‘subsidy fade → growth slowdown’ pattern. Breakdown:**

**Ticket:** the full rollout of the ‘+RMB 3 upsizing to extra large’ raises realized spend without a traditional price hike, shifting the core price band from RMB 10–13 toward RMB 12–15. **Meanwhile, paying members spend 30–40% more than non-members, and rising member mix supports higher ticket.**

**Volume:** after subsidy rollback, some churn among price-sensitive users is almost inevitable. Q4 monthly active paying users grew only 27% YoY with a clear QoQ slowdown, foreshadowing weaker cup volume.

1.  **Delivery costs remain the largest profit drag**

Q1 revenue was RMB 12.0bn, +35.3% YoY, slightly above expectations. By segment, company-operated store revenue reached RMB 9.0bn, +32.3% YoY, while franchised revenue was RMB 3.02bn, +44.5% YoY, **outpacing self-operated as Luckin systematically lowered franchise thresholds to accelerate lower-tier penetration.**

On GPM, while global coffee bean prices stayed high, **Luckin partially hedged via origin direct sourcing and LT contracts, and a higher share of non-coffee beverages diluted bean cost inflation, keeping GPM flat YoY.**

**On opex, Q3/Q4 showed that aside from delivery, other cost lines were well controlled.** **The biggest drag remained delivery, +48% YoY, with delivery as % of revenue jumping to 10.9% from 7.8%.** Although below last year’s subsidy peak (~19%), it is still above the 7–9% pre-war norm. Non-GAAP OP reached RMB 0.9bn, +4.1% YoY, with OPM down 2.2ppt YoY.

**Earnings Season**

Feb 26, 2026 earnings review: [‘Luckin: Did the delivery war hijack the coffee leader?’](https://longbridge.cn/zh-CN/topics/38922800?channel=SH000001&invite-code=7XHHT4&app_id=longbridge&utm_source=longbridge_app_share&locale=zh-CN&share_track_id=f474de6b-c832-4177-8282-0da2f029e8ff)

Nov 17, 2025 earnings review: [‘Luckin: A profit squat for a stronger rebound’](https://longbridge.cn/zh-CN/topics/36439843?channel=SH000001&invite-code=7XHHT4&app_id=longbridge&utm_source=longbridge_app_share&locale=zh-CN&share_track_id=a8e2937b-cf01-4b3c-b421-7d91772dfa8f)

Jul 30, 2025 earnings review: [‘Little Blue Cup in overdrive: Is the road clear for the coffee No.1?’](https://longportapp.cn/zh-CN/topics/32395078?channel=t32395078&invite-code=7XHHT4&app_id=longbridge&utm_source=longbridge_app_share&locale=zh-CN)

Apr 29, 2025 earnings review: [‘Not content to hoard cash, Luckin is stirring again?’](https://longportapp.cn/zh-CN/topics/29235935?channel=t29235935&invite-code=7XHHT4&app_id=longbridge&utm_source=longbridge_app_share&locale=zh-CN)

Feb 21, 2025 earnings review: [‘After RMB 9.9: Luckin turns the tide, Cotti survives’](https://longportapp.com/zh-CN/topics/27394061?invite-code=032064)

Oct 31, 2024 earnings review: [‘After the storm, is Luckin’s brief honeymoon here?’](https://longportapp.cn/zh-CN/topics/24943301?channel=t24943301&invite-code=7XHHT4&app_id=longbridge&utm_source=longbridge_app_share&locale=zh-CN)

Jul 30, 2024 earnings review: [‘Cotti not dead, Luckin getting old?’](https://longportapp.cn/zh-CN/topics/22802062?channel=t22802062&invite-code=R2HJ82&app_id=longbridge&utm_source=longbridge_app_share&locale=zh-CN)

Apr 30, 2024 earnings review: [‘Luckin: Can it stick the landing?’](https://longportapp.com/zh-CN/topics/20834516?invite-code=)

Feb 24, 2024 earnings review: [‘Luckin: Darkest before dawn’](https://longportapp.com/zh-CN/topics/11733460?invite-code=032064)

Nov 1, 2023 earnings review: [‘Full throttle: How many good days left for Luckin?’](https://longportapp.com/zh-CN/topics/10445325?invite-code=)

Aug 3, 2023 earnings review: [‘Luckin races to 10,000 stores, leader aura locked in’](https://longportapp.cn/zh-CN/topics/8741428?invite-code=032064)

May 2, 2023 earnings review: [‘Luckin: Store blitz and full recovery’](https://longportapp.cn/zh-CN/topics/5637588?app_id=longbridge&channel=t5637588&invite-code=276530)

Mar 2, 2023 earnings review: [‘New Luckin reborn from the ashes’](https://longportapp.cn/en/topics/4337439)

**Deep Dives**

Jan 16, 2024: [‘Cotti unsteady, Luckin unbroken’](https://longportapp.com/zh-CN/topics/11144628?invite-code=)

Mar 14, 2023: [‘Cutting out the tumor: Luckin’s turnaround victory’](https://longportapp.com/en/topics/4398240)

Feb 14, 2023: [‘Luckin (Part I): Coffee to the countryside — can county heat last?’](https://longportapp.cn/en/topics/3966736)

Risk disclosure and statement: [Dolphin Research disclaimer and general disclosures](https://support.longbridge.global/topics/misc/dolphin-disclaimer)

### Related Stocks

- [LKNCY.US](https://longbridge.com/en/quote/LKNCY.US.md)