Yum China Announces Q1 Financial Results

Yum China Holdings, Inc. Reports Q1 2024 Results

Yum China Holdings, Inc. (NYSE: YUMC and HKEX: 9987) released its unaudited financial results for the first quarter ending March 31, 2024.

First Quarter Highlights:

  • Total System Sales: Increased by 6% year over year (YoY), excluding foreign currency translation (F/X), driven by an 8% net new unit contribution.
  • Store Count: Reached 15,022 as of March 31, 2024, with 10,603 KFC stores and 3,425 Pizza Hut stores. The company opened 378 net new stores in the quarter, a record for Q1.
  • Total Revenues: Increased by 1% YoY to $2.96 billion. Excluding F/X, revenues would have been $154 million higher, a 7% increase YoY.
  • Same-Store Sales: Reached 97% of the previous year’s level, against strong performance in the same period last year.
  • Operating Profit: Reported at $374 million. Excluding F/X, operating profit would have been $22 million higher. Core operating profit grew 1% YoY to $396 million.
  • Operating Margin: Operating profit as a percentage of total revenues was 12.6%. Savings in G&A partially offset the lower restaurant margin, which was 17.6% in the quarter.
  • Diluted EPS: Increased by 4% YoY to $0.71, up 10% YoY excluding F/X.
  • Delivery Sales: Grew 12% YoY, contributing approximately 38% of KFC and Pizza Hut’s sales. Digital sales reached $2.5 billion, with digital ordering accounting for approximately 89% of total sales.
  • Total Membership: Reached 485 million for KFC and Pizza Hut. Member sales accounted for approximately 65% of system sales.
  • Shareholder Returns: Returned approximately $745 million to shareholders through share repurchases and cash dividends, the highest quarterly return in the company’s history.

CEO Comments:

Joey Wat, CEO of Yum China, stated, “We achieved solid sales growth in the first quarter, with total revenues hitting an all-time high. Our core operating profit grew modestly from last year’s high base, and EPS was up double digits excluding foreign currency effects. We are expanding strategically, reaching a milestone of 15,000 stores, and have set a new record in capital returns to shareholders. Our innovative approaches, such as high-ticket products and promotional campaigns, continue to drive growth and customer engagement. By optimizing delivery strategies, KFC expanded its market share on aggregator platforms, driving double-digit growth in delivery sales. We remain agile, focusing on efficiency from store to supply chain, allowing us to pass on savings to our customers.”

Wat added, “Despite near-term challenges, we are committed to understanding and meeting the evolving needs of consumers. We are confident in our ability to capture China’s vast opportunities with flexible store formats, strategic franchising, and diverse product offerings. These efforts position us well for sustained growth and long-term value creation for our shareholders.”

Operational Details:

  • KFC: System sales grew 7% YoY, driven by an 8% net new unit contribution. KFC opened 307 net new stores during the quarter, including 58 by franchisees. Operating profit was $372 million, and core operating profit was $392 million. Restaurant margin was 19.3%, with delivery sales growing 14% and contributing 39% of sales.
  • Pizza Hut: System sales grew 4% YoY, driven by an 8% net new unit contribution. Pizza Hut opened 113 net new stores, a 40% increase from the previous year. Operating profit was $47 million, and core operating profit was $50 million. Restaurant margin was 12.5%, with delivery sales growing 5% and contributing 37% of sales.

Accelerated Shareholder Returns:

Yum China repurchased 16.6 million shares of common stock for approximately $681 million in Q1. As of March 31, 2024, approximately $853 million remained available for future repurchases under the current authorization program. The board declared a cash dividend of $0.16 per share, payable on June 18, 2024, to shareholders of record as of May 28, 2024.

GAAP measures. See “Reconciliation of Reported GAAP Results to Non-GAAP Measures” for details.

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