Food delivery wars become a "profit harvesting machine"? Luckin's net profit plummets by 39%

In 2025, Luckin Coffee hit an all-time high in revenue, but the “food delivery wars” devoured its profit. If it had not participated in this campaign, its year-ago fourth-quarter revenue growth rate could have fallen significantly. This can be described as a “no-win” dilemma.

On the evening of February 26, Luckin Coffee (OTC: LKNCY) released its 2025 fourth-quarter and full-year financial reports.

Last year, the company’s total net revenues were 49.29B yuan, up 43%; its net profit attributable to shareholders reached 3.6 billion yuan, up 21.8%, but its net profit margin was only 7.3%. This metric has declined for two consecutive years.

Looking closely at the reports, Luckin began seeing “revenue growth without profit growth” as early as its third quarter last year. By the fourth quarter, net profit was only 518 million yuan, down 39% year over year. At a subsequent earnings call, Luckin’s management said this short-term fluctuation “was in line with internal expectations,” but the capital market offered a more real response—after the open, the company’s share price fell sharply. The biggest intraday decline was 6.7%. It ultimately closed at $36.07, down 3.94% from the prior day.

Single-quarter delivery fees exceeded 1.6 billion yuan

Luckin’s last major profit downturn was in the second quarter of 2024. At the time, it launched a “9.9-yuan price war” to meet the challenge of KUDOS Coffee’s rapid expansion, and profit pressure from falling average order value.

This time, however, it was dragged down by the “food delivery wars.”

Leveraging its large store network and stable operating capabilities, Luckin became an important partner for major internet platforms in developing the instant retail business to capture orders. At the time, some franchisees said bluntly, “We’re going to make a killing.” The orders were simply not enough to be fulfilled in time, and the subsidies would not affect their income. But this phenomenon-level trade war did not make Luckin earn more money—instead, the resulting delivery fees and platform commissions ate into profits.

The financial report shows that Luckin’s delivery costs in the fourth quarter of last year were as high as 1.63B yuan, up 94.5% year over year, nearly doubling. Normally, this expense is about 8% of the company’s total revenue, but the proportion in that period reached 12.8%.

At the earnings meeting, Luckin’s management pointed out that “in the fourth quarter, the support strength for delivery-platform subsidies noticeably shrank, and the share of delivery orders decreased quarter over quarter, but it is still at a relatively high level.”

In the past, the vast majority of consumers’ habit when buying Luckin was “order online and pick up at the store.” But under the “delivery subsidy war,” Luckin’s order mix and cost structure changed.

Besides the most direct delivery fees, other hidden costs were also increasing.

The financial report shows that in the fourth quarter of last year, Luckin’s selling and marketing expenses were about 756 million yuan, up 31.9% year over year. This was mainly due to higher commission fees paid to third-party delivery platforms, as well as increased advertising spend.

Revenue growth slows

Although pressure on quarterly profits remained, Luckin’s overall performance trend of repeatedly reaching new highs did not change. This was thanks to its continuously expanding store footprint.

By the end of 2025, Luckin’s total number of global stores had already exceeded 31k. Of these, about 65% were company-operated stores and around 35% were franchised stores. From a regional perspective, the mainland market had more than 30k stores. While participating in the “food delivery wars,” the company maintained a fairly aggressive pace of store openings—adding a net 8,708 stores in a single year. It even surpassed the total number of stores opened by Starbucks in the 27 years since it entered China.

However, the high growth in store scale instead reflects problems such as slowing revenue growth, declining same-store sales, and weakening product competitiveness.

In the fourth quarter of last year, Luckin’s revenue was 12.78 billion yuan, with year-over-year growth of 32.9%, lower than the revenue growth rates for the same period in the prior three years (36%, 91%, 52%). This suggests that without the boost of the “food delivery wars,” Luckin’s original revenue growth rate would likely have been even lower.

At a fundamental level, Luckin’s product competitiveness is weakening.

Last year, Luckin rolled out more than 140 new products and pushed hard on non-coffee beverage business. Internally, R&D and marketing resources were tilted toward this area. Management stated that currently the share of non-coffee beverages in the company has already exceeded 20%. But whether or not the products are coffee, in recent years, very few of its new items have become standout singles that the market remembers.

On its original coffee track, Luckin also faced multiple challenges.

KUDOS Coffee and Nwava Coffee achieved rapid expansion with a “convenience store parasitism” model. Meanwhile, Guming, a “cross-category player” with tens of thousands of stores, began ramping up its coffee business, squeezing Luckin’s existing market.

Combined with its own stores continuing to be further densified, in the fourth quarter of last year, same-store sales at Luckin’s company-operated stores grew by only 1.2%. Store profit margins were 15%, down 4.6 percentage points versus the same period.

At the earnings meeting, analysts asked about Luckin’s development plan for 2026.

Management said, “Securing market share remains the top priority in our strategic planning,” but it also emphasized that “considering the high base created by large-scale subsidies in 2025, 2026 same-store and profit performance may face certain stage-by-stage fluctuations and challenges.”

Becoming a world-class coffee brand has always been Luckin’s vision.

Last year, the company accelerated its overseas expansion. It added a net 42 stores in just the fourth quarter. Currently, the total number of overseas stores is 160. Among them, in Singapore there are 81 company-operated stores, making it the second-largest coffee chain brand by scale in the local market. In the United States there are 9 company-operated stores. In Malaysia, it quickly opened 70 stores through the franchise model.

However, Luckin did not provide a clear strategy for its international expansion this year. Luckin Coffee CEO Guo Jinyi emphasized, “Mainland China is still the coffee market with the most room for imagination in the world.”