Before the US stock market opened on November 13, Rui Xing Coffee announced its third quarter earnings report for 2019. If you want to find a keyword in this financial report, it is undoubtedly “profitable.”

Of course, this “profit” does not mean that the company as a whole achieves profitability. Ruixing Q3 financial report shows that the company achieved revenue of 1.5416 billion yuan, a year-on-year increase of 540.2%; net loss was 531.9 million yuan, an increase of 9.7% year-on-year, but the net loss of 680 million yuan in the second quarter of this year was reduced by 21.8%.

Although the company is still losing money, Ruixing is in the store for the first time in this store(operation)< /span> Level of profitability – that is, not counting marketing expenses, realized operating profit of 186 million yuan, operating profit margin reached 12.5%. In the same period last year, the company’s operating loss was still 126 million yuan.

The revenue is over 5 times growth, the overall loss is narrowing, and the store level is profitable. In general, Ruisheng’s financial report is a good student answer. In the answer sheet, there are several trends worth noting.

“Loss” or “Profit”?

A lot of catering industry people are confused about the huge difference between Ruixing’s company-level losses and store-level earnings.

The answer is marketing expenses (sales and marketing expenses), marketing expenses are included in the company’s overall operating costs , not at the store level calculation. According to the third quarterly report, Ruixing’s marketing expenses in this quarter amounted to 558 million yuan, an increase of 148% compared with 225 million yuan in Q3 last year.

Rui Xing said in the financial report that this is mainly due to the increase in advertising expenses, including the entry of new stores into new cities, the separation of Xiaolu tea into independent brands, etc. In September this year, Ruixing announced the spin-off of Xiaolu Tea as an independent brand. Independent operation, will be opened as a “new retail partner”, the main attack sinking market, and invited the high popularity traffic star Xiao war as a spokesperson.

So, is it because Ruixing has counted the subsidies that have been taken out at the company headquarters, and has it earned at the store level?

In terms of finance, Ruixing’s “subsidy” should be understood as two categories, namely “first cup free” subsidy and othersubsidy. Rui Xing emphasized in the financial report that the company’s marketing expenses include advertising expenses, marketing activities, delivery costs, and the first cup of free subsidies. However, Ruisheng’s revenue is net income (except the first cup) and other items are reflected in the calculation of income, so this part of the subsidy is not included in the marketing expenses. Of course, the financial report does not mention the specific amount of subsidies for the first and second cups.

Rui Xing founder and CEO Qian Zhiya said at the performance meeting that the marketing fee for this quarter is higher than the forecast, mainly due to the launch of the deer tea store partnership operation mode, the market cost will be lower than this quarter. Quarter.

A gratifying signal is that the growth of Ruixing’s product revenue in this quarter is greater than the growth of the number of merchandise sales. The growth rate of merchandise sales is greater than the growth of monthly average number of trading users. The growth of customers is greater than the growth of the number of stores. (see the figure below for details). This shows that, at least in the same period last year, Ruixing’s operational efficiency and profitability are improving, and the soaring income is not solely driven by opening new stores.

Screenshots from Ruixing Q3 Financial Reporting Materials

In Q3, Rui Xing opened 717 stores, and the total number of stores reached 3,680. According to Starbucks’ previously released Q3 earnings report, as of September 30 this year, Starbucks has more than 4,000 stores in China.

In the second quarter of this year’s performance meeting, Rui Xing set himself the goal of “4,500 stores by the end of 2019”. If this goal is finally achieved, it may exceed Starbucks and become the coffee chain with the largest number of domestic stores. .

In addition to coffee, Ruisheng has something else

This financial report also shows that Ruixing’s product structure is constantly changing.

The financial report shows that non-coffee products account for 45% of product revenue, while non-coffee products accounted for 31% of product revenue in 2018.

The picture on the left is Ruixun non-coffee products, and the picture on the right shows the proportion of non-coffee products in product revenue

Rui Xing has been trying to offer a wide range of goods. Open the app of Ruixing Coffee. The drinks and foods are divided into eight sub-categories: Master Coffee, Deer Tea, Rena Ice, Freshly Squeezed Fruit and Vegetable Juice, Classic Drink, Healthy Light Food, Ruixing Nut, Lucky Snack. In addition to eating, Rui Xing also created a separate category of “Wide Peripherals” in the App, including the Mug, the accompanying cup, and the series of peripherals that cooperate with other cultural brands.

Among them, Ruixing Nut is a category that has just been launched in early November. It currently includes five flavors of cashew products such as purple, mustard, durian, honey and seaweed. According to the interface report, Rui Xing said that there are currently 5 cashew nuts on the line. The foundry is Zhongan Zhongguo, and in the future, it will be launched in the category of mixed nuts and nut gift boxes provided by world-renowned nut raw materials such as OLAM.

Time pushes a little further. On September 26, Rui Xing announced a strategic cooperation with Louis Dreyfus (LDC) Established a joint venture company to build a production plant in China that focuses on NFC (non-concentrated reduction) juice, and launched a joint juice brand. Currently NFC juice sold by RuixingNot a private label, but a zero-degree fruit shop.

Juice, Light Food, Snacks, Surroundings… Ruixing is constantly expanding its offerings and seeking new growth points. Under such circumstances, there is no doubt that in the next financial report handed over by Rui Xing, the most attention of investors must be the operation of the Xiaolu tea brand that was just launched in September – Ruisheng can rely on the franchise model again. Copy a Rui Xing” out?

This is the question that Ruixing needs to answer in the 2019 annual report.