Morning Brief – Luckin Coffee

Morning Brief – Luckin Coffee

Mon 6 Apr 2020

Luckin Coffee


We have written previously about this Nasdaq quoted Chinese wannabe rival to Starbucks. It all seems a bit passé now in present circumstances with all cafe chains shut for drink in business, but Luckin’s shares having stood at $50 in January they fell to less than $10 on Friday night. It’s a well worn path for those who have set overly ambitious budgets, but Luckin’s management appear to have followed it in Olympic style having created $310 million of fictitious sales for just the last 3 quarters in 2019.
Markets are not presently in the mood for forgiveness when it comes to the F&B sector but when it turns out that the share price has been predicated on sales which simply did not exist, analysts are not slow to get their red pencils out. Presumably to match their red faces…



Oil Price Volatility


Friday night saw WTI close at $28.34 on the prospect of Saudi Russian accord on supplies and pricing. They are due to sit down virtually at least on Thursday 9/4/20 but a spat over the weekend cast doubt on that. Oil has opened at $27.80 in Asia and the markets are still hoping that Saudi Arabia and Russia will meet but it is increasingly clear that the USA will be required to broker an OPEC + agreement. Russia has put out an announcement this morning saying that the two sides are very very close to agreeing so the domestic pressure there is clearly on the minds of negotiators that side of the table.



German Surge


Sadly not in the wider economy but most definitely in a niche German sector. Stung by our piece on the sudden March increase in the sales of sex toys in Canada, Germany has er risen to the challenge. Increases in the sales of sex toys according to Hamburg supplier Dildo King (yes really) were up 87% year on year. While in Bavaria there has been a 3000% increase in demand for fantasy nurse uniforms. We certainly don’t want to start any further panic buying, but demand for condoms is up 500% in Germany and Malaysian manufacturer Karex has warned that they are unable to fulfil demand. Karex incidentally makes 20% of all condoms globally. Here in the UK Ann Summers has seen a much more modest increase of 26% in sales yoy. Best seller is the Rabbit Whisper which is much in demand due to its “ near silent operation.” Presumably before any expressions of user satisfaction…..




Discussion and Analysis by Humphrey Percy, Chairman and Founder

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