Yum China Reports Second Quarter Results | The Manila Times

Record Second Quarter Revenue Led by Same-store Transaction Growth and New Unit Growth

Improved OP Margin and Achieved Record Second Quarter Operating Profit

Operating Profit Grew 4%, Core Operating Profit¹ Grew 12%, Diluted EPS Grew 17%

Record First Half Openings of 779 Net New Stores and Cash Returns to Shareholders of Nearly $1 Billion

SHANGHAI, China, Aug. 6, 2024 /PRNewswire/ -- Yum China Holdings, Inc. (the "Company" or "Yum China") (NYSE: YUMC and HKEX: 9987) today reported unaudited results for the second quarter ended June 30, 2024.

Second Quarter Highlights

Total system sales grew 4% year over year ("YoY"), excluding foreign currency translation ("F/X"), on top of last year's high base. The growth was primarily attributable to 8% of net new unit contribution.²
Total store count reached 15,423 as of June 30, 2024, including 10,931 KFC stores and 3,504 Pizza Hut stores. The Company opened 401 net new stores in the quarter. 99 net new stores, or 25%, were opened by franchisees.
Total revenues increased 1% YoY to $2.68 billion, a record-high for the second quarter. Excluding F/X, total revenues would have been $85 million higher, or a 4% increase YoY.
Same-store sales reached 96% of the prior year's level. Same-store transactions grew 4% YoY.
Operating profit grew 4% YoY to $266 million, a record level for the second quarter. Excluding F/X, operating profit would have been $9 million higher, or a 7% increase YoY. Core operating profit¹ grew 12% YoY to $275 million.
OP Margin³ was 9.9%, an increase of 20 basis points YoY, supported by resilient restaurant margins and savings in G&A expenses.
Restaurant margin was 15.5%. Excluding $12 million in items affecting comparability, restaurant margin was approximately the same as the second quarter last year. Improvement in operational efficiencies supported margin stability.
Diluted EPS increased 17% YoY to $0.55, a record level for the second quarter, or up 19% YoY excluding F/X.
Delivery sales grew 11% YoY, maintaining the double-digit growth Yum China has carried over the past decade. Delivery contributed approximately 38% of KFC and Pizza Hut's Company sales.
Digital sales⁴ reached $2.2 billion, with digital ordering accounting for approximately 90% of total Company sales.
Total membership of KFC and Pizza Hut exceeded 495 million. Member sales accounted for over 65% of KFC and Pizza Hut's system sales in aggregate.
Yum China returned $249 million to shareholders in the second quarter through share repurchases and cash dividends. Year to date, the Company has returned nearly $1 billion to shareholders, exceeding its full-year 2023 returns.

Joey Wat, CEO of Yum China, commented, "We achieved our most profitable second quarter since the spin-off, with core operating profit growing by 12% despite challenging industry dynamics. Our sharp focus on value-for-money and innovative new products worked well, driving robust same-store transaction growth. We took proactive actions to improve operational efficiency, stabilizing restaurant margin and expanding OP margin year over year."

Wat added, "By reducing the complexity of menus and operations, and harnessing the power of automation and AI, we improved operational efficiency. These measures gave us the flexibility to invest in menu innovation and compete on value. KFC has successfully gained market share on delivery platforms by expanding its price range and lowering delivery fees. Pizza Hut attracted value-conscious customers with its entry-price pizzas and solo diners with its Pizza Dough Burger. Our business model breakthroughs enabled us to broaden our addressable market and capture more customer occasions. Our side-by-side KCOFFEE cafe and Pizza Hut WOW store model delivered incremental sales and showed great future potential. Our new stores maintained good returns, with a consistent payback period of 2 years for KFC and an improved level of 2 to 3 years for Pizza Hut. With our industry-leading capabilities and scale, we are turning challenges to our competitive advantage. We believe that we are well positioned to capture the long-term growth opportunities in China and, ultimately, create enduring value for our shareholders."

^[1]Core operating profit is defined as operating profit adjusted for special items, further excluding items affecting comparability and the impact of F/X. The Company uses core

operating profit for the purposes of evaluating the performance of its core operations. Please refer to "Reconciliation of Reported GAAP Results to Non-GAAP Measures" included in

the accompanying tables of this release for further details.

^[2]Net new unit contribution refers to sales contribution from net new stores.

^[3]OP margin refers to operating profit as a percentage of total revenues.

^[4]Digital sales refer to sales at Company-owned stores where orderings were placed digitally.

Key Financial Results

Second Quarter

Year to Date Ended 6/30

%/ppts Change

2024

2023

Reported

Ex F/X

2024

2023

Reported

Ex F/X

System Sales Growth ⁽⁵⁾ (%)

Same-Store Sales Growth ⁽⁵⁾ (%)

(4)

(3)

Operating Profit ($mn)

266

257

640

673

(5)

Adjusted Operating Profit ⁽⁶⁾($mn)

266

259

640

678

(6)

(1)

Core Operating Profit ⁽⁶⁾ ⁽⁷⁾($mn)

275

247

+12

671

639

OP Margin (%)

9.9

9.7

+0.2

11.4

12.1

(0.7)

Core OP Margin ⁽⁶⁾ ⁽⁸⁾ (%)

10.0

9.3

+0.7

11.4

11.5

(0.1)

Net Income ($mn)

212

197

+11

499

486

Adjusted Net Income ⁽⁶⁾($mn)

212

199

+10

499

491

Diluted Earnings

Per Common Share ($)

0.55

0.47

+17

+19

1.26

1.15

+10

+14

Adjusted Diluted Earnings

Per Common Share ⁽⁶⁾($)

0.55

0.47

+17

+19

1.26

1.16

+13

^[5]System sales and same-store sales percentages exclude the impact of F/X. Effective January 1, 2018, temporary store closures are normalized in the same-store sales

calculation by excluding the period during which stores are temporarily closed.

^[6] See "Reconciliation of Reported GAAP Results to Non-GAAP Measures" included in the accompanying tables of this release for further details.

^[7]Current period amounts are derived by translating results at average exchange rates of the prior year period.

^[8] Core OP margin refers to core operating profit as a percentage of total revenues excluding F/X.

Note: All comparisons are versus the same period a year ago.

Percentages may not recompute due to rounding.

NM refers to not meaningful.

KFC