Strong first quarter for Yum China
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Sales, profits and margins all grew, along with store expansion, for Yum China Holdings in its unaudited results for its first quarter to the end of February.
Same-store sales grew 1 per cent, including growth of 1 per cent at KFC and 2 per cent at Pizza Hut Casual Dining. Total system sales grew 4 per cent (3 per cent at KFC and 9 per cent at Pizza Hut).
The group opened 133 restaurants during the quarter.
Total restaurant margin increased 3.7 points to 23 per cent, mainly helped by retail tax structure reform implemented on May 1.
Operating profit grew 22 per cent and 27 per cent excluding foreign exchange, which negatively impacted operating profit by $12 million.
Net income increased 21 per cent to $175 million, while adjusted pre-tax earnings rose 14 per cent to $320 million.
Yum China has more than 7600 restaurants, with a two-to-one lead over the nearest Western quick-service restaurant competitor and an approximate six-to-one lead over the nearest Western casual-dining restaurant competitor in China, says CEO Micky Pant.
“We are especially gratified with the progress made on two key drivers of growth – digital and delivery,” he says. “More than 4400 restaurants in our system offer deliveries, and we believe we have established an infrastructure for continued growth.
“In the first quarter, delivery represented about 12 per cent of our company sales. With about 93 million loyalty program members between KFC and Pizza Hut Casual Dining, we believe we have unprecedented insights into consumer behaviour and have been engaging with them across the digital eco-system: from pre-order to payment.
“We remain confident in our ability to deliver 550 to 600 new builds while delivering double-digit growth in operating profit, excluding foreign exchange, this year.”
Members in the loyalty programs increased to about 70 million for KFC and 23 million for Pizza Hut.
Mobile payments reached about 30 per cent of company sales, with more than $500 million in sales paid via cashless payment methods.
Questions & Answers
Q.What specifically contributed to the improvement in the total restaurant margin during the quarter?
What specifically contributed to the improvement in the total restaurant margin during the quarter?
The total restaurant margin saw an increase of 3.7 points, reaching 23 per cent. This improvement was mainly due to a retail tax structure reform that was implemented on May 1.
Q.How significant is the contribution of delivery services to Yum China's sales figures?
How significant is the contribution of delivery services to Yum China's sales figures?
Delivery services are a notable part of the company's operations, representing about 12 per cent of company sales in the first quarter. Over 4400 restaurants within their system offer deliveries.
Q.What is the company's outlook regarding new restaurant openings and profit growth for the current year?
What is the company's outlook regarding new restaurant openings and profit growth for the current year?
Yum China is confident in its ability to open 550 to 600 new restaurants this year. They also expect to achieve double-digit growth in operating profit, excluding foreign exchange impacts.
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