(Yicai Global) March 3 -- Luckin Coffee’s net profit tumbled 94 percent in the fourth quarter from a year ago after the Chinese coffee chain paid a USD180 million penalty to settle accounting fraud charges with the US Securities and Exchange Commission.

Net profit was CNY54.5 million (USD7.9 million) in the three months ended Dec. 31, the Xiamen-based company’s latest financial report showed yesterday. Revenue jumped 52 percent to CNY3.7 billion (USD535.7 million).

Luckin Coffee, once hailed as China’s answer to Starbucks, agreed to pay USD180 million to settle the SEC’s charges that the firm defrauded investors by misstating revenue, expenses, and net operating loss in an attempt to falsely appear to grow quickly and increase profitability and to meet its earnings estimates.

The SEC’s complaint alleged that “from at least April 2019 through January 2020, Luckin intentionally fabricated more than USD300 million in retail sales by using related parties to create false sales transactions through three separate purchasing schemes,” the regulator said in a press release at the end of 2020.

Luckin Coffee subsequently delisted from the Nasdaq stock market in July 2020, and filed for bankruptcy protection in the US in February 2021. Payment of the SEC fine basically marks the end of the firm’s accounting fraud saga.

For the full year of 2022, revenue jumped 67 percent to CNY13.3 billion, surpassing CNY10 billion for the first time, according to the company’s earnings report. Net profit fell 15 percent to CNY488 million

Luckin Coffee did not provide earnings guidance for 2023, citing economic and geopolitical uncertainties. The management team remains cautious, but expects China’s eased Covid-19 controls to have a positive impact on consumer confidence, Chief Financial Officer An Jing said on an earnings conference call yesterday, The Paper reported today.

The company closed nearly 1,500 cafes on a temporary basis in the fourth quarter due to the pandemic, Chairman and Chief Executive Guo Jinyi said on the same call, according to The Paper.

But Luckin Coffee continued to expand rapidly last year, adding a net 2,190 stores. It had 8,214 as of the end of 2022: 5,652 self-owned and 2,562 franchised outlets.

“We’re confident of raising the number of stores to 10,000 this year,” Guo noted, adding that resuming the recruitment of joint venture partners is an important way to speed up new openings. Luckin opened nearly 500 outlets in January after restarting partner recruitment in December, An said.

Editor: Peter Thomas