Rui Xing is still losing money, but the store is starting to make a profit.
On the evening of November 13, Rui Xing Coffee (LK.US) released its third quarter earnings report for the 2019 fiscal year before the US stock market.
The financial report shows that revenue for the quarter was 1.54 billion yuan, up 539% year-on-year and 69% quarter-on-quarter, higher than Bloomberg expects. The adjusted net loss reached 574 million yuan, an increase of 18% year-on-year and a 16% quarter-on-quarter decrease. exceeded analysts’ estimates.
Rui Xun coffee revenue growth trend, ring growth rate change, net loss trend chart (cartography, data from Ruixing official)
surrendered a financial report higher than market expectations, and Ruisheng rose 7%.
This quarter’s revenue continued to grow at a high rate, and it is still related to Ruisheng’s continued large-scale store expansion and category expansion. According to the financial report, Ruixing Coffee added 717 stores in the quarter, and the total number of stores in the quarter reached 3,680. The continued expansion of the store has brought a large number of new customers. The number of Ruixing coffee users increased to 30.7 million in the quarter, an increase of 413% year-on-year, and the effective sales price continued to rise, confirming the expectations of the company’s CFO Reinout Schakel’s second-quarter earnings conference call.
At present, Ruixing has a target of 4,500 stores by the end of 2019. Ruixing will open nearly 1,000 stores in the fourth quarter. According to the growth rate of Ruisheng’s stores, this goal is not difficult to achieve. As a result, in the next quarter, as the store continues to expand significantly, Ruixing’s revenue will continue to grow rapidly.
Based on the continuous expansion of the category, the number of products sold by Ruixing every month has also increased significantly. In the quarter, Ruixing did not sell 44 million items, a surge of 470% year-on-year. This quarter, Ruixing announced the independent new tea brand Xiaolu Tea, and opened more than 20 subsidiaries across the country. Last week, Rui Xing also launched a nut product.
At the same time, Ruixing is also actively cooperating with upstream and downstream and cross-border. First, it signed an agreement with Louis Duffy to develop the NFC juice brand business, and signed a cooperation framework agreement with Hals to develop Ruixing peripheral products.
Ruixing said in the second quarter earnings conference call to achieve break-even at the store level in the third quarter. In the quarter, Ruisheng Store achieved profit for the first time, reaching 186 million yuan, a loss of 126 million in the same period last year. Previously, Ruixing used three-party logistics companies such as SF Express to carry out the delivery, and in the second quarter, it still needs to pay a logistics subsidy of 0.8 yuan per order. The problem is currently being resolved as the size of the store continues to increase.
Although revenue growth is strong and break-even is achieved at the store level, net losses are still growing. On the one hand, Ruixing continued to focus on the development of new stores in the third quarter, not only including the original coffee shop, but also added a large number of Xiaolu tea shops, which increased the operating costs of its stores. The company plans to reduce costs by reducing waste of raw materials, improving bargaining power, improving operational efficiency through technology, and increasing store throughput, but it is difficult to achieve results in the short term.
On the other hand, with the emergence of new brands and products such as Xiaolu tea and nuts, Ruisheng still has to carry out large-scale advertising, and the marketing expense rate that has been effectively controlled has also appeared in these two quarters. In the second quarter, the marketing cost was as high as 240 million yuan, and the marketing expenses in the quarter were as high as 557 million yuan. However, due to the surge in Ruixing coffee revenue, the marketing expense rate was once again controlled.
Rui Xing Coffee Marketing Expense Rate, Cartography: Data from Ruixing Official
From the perspective of this quarter’s financial report, although Ruisheng still maintains the overall loss situation, the proportion of losses is significantly lower than before.