Fashion
Running restaurants in China is tough when a big part of the population stays home to avoid catching the coronavirus.
Yum China , operator of KFC and Pizza Hut in the country, gave a glimpse of the current predicament in results posted after the U.S. close Wednesday. It has temporarily closed more than 30% of its restaurants in China, and business has been bad even for the ones that remain open. Sales during the Lunar New Year holiday were down 40%-50% compared with last year, excluding newly opened outlets.
The company, which was spun off from Yum Brands in 2016, said it may report operating losses for this quarter—and even for the full year if the trend continues. Yum China’s New York-listed shares fell 3% in after-hours trading.
KFC and Pizza Hut aren’t the only chains that have had to shut restaurants because of the outbreak, which has infected nearly 30,000 and killed more than 500 so far. Starbucks and McDonald’s have also temporarily closed some of their outlets in China. The former, in particular, could get hurt as customers opt to stay at home instead of chilling out in its coffee shops.
Yum China could soften the blow with its delivery business, which accounted for nearly a quarter of its revenue last quarter. It said it would also try to reduce its costs. Some of these—food, labor, advertising and rent—are variable, but the company will still incur substantial fixed costs through the closure period.
