Yum China speeding up expansion plans
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Yum China plans to invest up to US$525 million opening between 800 and 850 new stores in the current financial year.
Most of the new stores will be KFC outlets and of its new cafe chain Coffii & Joy.
The protections were included in the company’s second-quarter results released overnight, which showed total system sales up 10 percent year on year to US$2.12 billion, with KFC leading the way at 12 percent. Sales at Pizza Hut rose by 4 percent.
While sales were up, much of the growth was driven by network expansion. Same-store sales grew 4 percent, with a 5-per-cent increase at KFC and a 1-per-cent increase at Pizza Hut.
Restaurant margin slipped from 15.1 percent to 14.7 percent, however, operating profit rose 6 percent from $193 million to $204 million.
Net Income increased 24 percent from $143 million to $178 million, primarily due to the increased operating profit and a gain from the company’s equity investment in Meituan Dianping.
During the quarter, Yum China opened 178 new restaurants taking its store count to 8751 across more than 1300 cities.
“We continued to capitalise on market opportunities across China with aggressive, KFC-led store expansion,” said Yum China CFO Jacky Lo. “With a strong cash payback period for new KFC stores and many untapped opportunities, we intend to continue to rapidly expand our store footprint in the second half of the year.
“Looking forward, we expect overall sales growth to moderate as KFC begins to lap several key sales drivers, including successful value campaigns that we initiated in the second half of last year. However, we remain confident that our strong foundation and commitment to innovation throughout our business will power continued growth for Yum China. We will continue to create new and exciting menu items, and leverage our leadership in digital, data and delivery to meet the evolving needs of our consumers.”
Questions & Answers
Q.What proportion of Yum China's new stores will be KFC outlets or part of its new cafe chain?
What proportion of Yum China's new stores will be KFC outlets or part of its new cafe chain?
The article states that most of the new stores will be KFC outlets and those of its new cafe chain, Coffii & Joy. The company plans to open between 800 and 850 new stores in the current financial year.
Q.Did Yum China's second-quarter sales growth primarily come from existing stores or new locations?
Did Yum China's second-quarter sales growth primarily come from existing stores or new locations?
Much of the sales growth was driven by network expansion, meaning new locations. Same-store sales grew by 4 percent which was a smaller contribution compared to total system sales growth of 10 percent.
Q.What factors contributed to the 24 percent increase in Yum China's Net Income?
What factors contributed to the 24 percent increase in Yum China's Net Income?
The Net Income increase was primarily due to the increased operating profit, which rose 6 percent, and a gain from the company’s equity investment in Meituan Dianping. This pushed Net Income from $143 million to $178 million.
Q.Why does Yum China expect its overall sales growth to slow down in the near future?
Why does Yum China expect its overall sales growth to slow down in the near future?
Overall sales growth is expected to moderate as KFC begins to 'lap' several key sales drivers from the previous year. These include successful value campaigns initiated in the second half of last year.