(Yicai) May 6 -- Luckin Coffee, the largest rival of Starbucks in China, reported a loss for the first quarter of this year after the Chinese coffee chain's earnings shrank amid the ongoing price war in the local market.

Net loss was CNY83.2 million (USD11.5 million) in the three months ended March 31, versus a net profit of CNY564.8 million (USD78 million) a year earlier, the Xiamen-based firm said in a financial report released on April 30. Revenue jumped 42 percent to CNY6.3 billion (USD869.5 million).

The operating margin of self-operated stores narrowed to 7 percent from 25 percent a year ago because of a decline in the average price of products, Luckin Coffee noted. The number of shops increased by 2,342 in the first quarter, bringing the total to 18,590, it added.

Luckin Coffee will adhere to a steady and sustainable strategy in store opening to consolidate its leading position in China as the domestic coffee market is at a critical point for rapid growth with fierce competition, Chairman and Chief Executive Guo Jinyi said on the firm's earnings conference call.

The latest round of price wars in China's coffee sector was triggered by Cotti Coffee, founded by Luckin Coffee's ex-Chairman Lu Zhengyao. It pioneered the CNY9.90 (USD1.40) offer for a cup of coffee in May last year, with other brands, such as Luckin Coffee, following suit.

Luckin Coffee's revenue surged 87 percent to CNY24.9 billion (USD3.5 billion) last year from 2022 to overtake Starbucks China for the first time, whose revenue was USD3 billion in the fiscal 2023.

Starbucks has been more significantly impacted by competition this year. Its global net profit tumbled 15 percent to USD772.4 million in the quarter ended March 31 from a year earlier, while revenue fell 2 percent to USD8.6 billion, its earnings report showed on May 1. Its income in China dropped 8 percent to USD705.8 million.

Starbucks [NASDAQ: SBUX] plunged 15.9 percent to USD74.44 a share on May 1, its biggest single-day drop since March 2020. The stock fell 2.4 percent to close at USD73.11 on May 3.

Editors: Dou Shicong, Martin Kadiev