(Yicai) July 31 -- Luckin Coffee, which beat Starbucks to become China’s biggest coffee retailer last year, said profit fell 13 percent in the second quarter from a year ago mainly due to lower average product prices amid a volatile market environment and industry seasonality.

Net profit was CNY871.1 million (USD121 million) in the six months ended June 30, the Xiamen-based firm said in a financial report released yesterday. Based on non-generally accepted accounting principles, which adjusts for share-based compensation expenses, operating income fell to CNY1.15 billion from CNY1.24 billion (USD158.3 million from 179.6 million).

Revenue climbed 36 percent to CNY8.4 billion, with the growth mainly coming from increases in the number of products sold, stores in operation, and monthly transactional users, the firm said. MTU numbers rose 62 percent from a year earlier to almost 62 million.

“Thanks to our advanced business model, continuous product innovation and scale advantages, we've achieved rapid revenue growth and returned to normalized profit growth,” Chairman and Chief Executive Jinyi Guo said on an earnings conference call.

China’s retail coffee market, which apart from the big high street names also includes many boutique and specialty coffee brands, is fiercely competitive as rivals scramble to attract price-sensitive consumers, including with frequent promotions, discounts, and special offers.

As competition intensifies, Luckin Coffee will adhere to a steady and sustainable store opening strategy, increasing the number in high-tier Chinese cities and expanding faster into low-tier markets through a partnership model, Guo said.

The company made great progress growing its footprint in the second quarter, opening 1,371 new outlets, five of them in Singapore, he said, adding that as of this month, Luckin Coffee now has more than 20,000 stores.

For the first half, net profit halved to CNY788 million (USD108 million). Revenue jumped 38 percent to CNY14.7 billion (USD2 billion).

Editor: Martin Kadiev