Starbucks China rival Luckin Coffee Inc forecast fourth-quarter revenue above estimates and posted a smaller-than-expected loss on Wednesday, as the company benefited from rapid store openings and lower expenses.
The company’s shares, which have gained about 12% from the May initial public offering price, rose nearly 8% in premarket trading before paring some gains.
Since its launch in 2017, Luckin has not shied away from spending heavily to open stores as part of its stated goal of overtaking Starbucks Corp in China by the end of the year.
The company opened about 700 stores in the third quarter, taking its total in China to 3,680, while Seattle-based Starbucks took two decades to reach 4,125.
Starbucks is largely credited with making a nation of tea-lovers embrace coffee and Luckin is looking to ride on that through rapid expansion, heavy advertising and promotions.
Luckin’s results follow a strong show in China by Starbucks, helped by new stores, a beefed up loyalty program and an expanded delivery network through a partnership with Alibaba Group Holding Ltd.