Robust Sales Growth, Margin Expansion and 33% Diluted EPS Growth
Sequential Improvement in Same-Store Sales Index and Seventh Consecutive Quarter of Same-Store Transaction Growth
Operating Profit Increased by 15% to $371 Million and Core Operating Profit1 Grew 18%
Stepping up Capital Returns to Shareholders by 50% to $4.5 Billion for 2024-2026
SHANGHAI, Nov. 4, 2024 /PRNewswire/ — Yum China Holdings, Inc. (the “Company” or “Yum China“) (NYSE: YUMC and HKEX: 9987) today reported unaudited results for the third quarter ended September 30, 2024.
Third Quarter Highlights
Joey Wat, CEO of Yum China, commented, “We delivered strong results again in the third quarter. Operating profit increased by 15%, core operating profit grew 18%, and diluted EPS increased by 33%. OP margin expanded by 100 basis points, and restaurant margin improved year-over-year on a comparable basis. We also achieved seven consecutive quarters of same-store transaction growth and decade-long double-digit delivery sales growth. Our RGM 2.0 strategy is executing effectively, with a dual focus on operational efficiency and innovation. Savings generated from improved efficiency allowed us to reinvest in food innovation and our value-for-money offerings, driving incremental traffic to our stores. Same-store sales index improved sequentially for both KFC and Pizza Hut. These results demonstrate the effectiveness of our strategy and our ability to outperform in a challenging and fluid environment.”
Wat added, “We regard both system sales and same-store sales growth as equally important. With these priorities in mind, we continue to drive menu innovations, infusing fresh energy into our flagship products. By optimizing our delivery strategy, we have captured more smaller order transactions and gained market share on aggregator platforms. Our breakthrough business models, side-by-side KCOFFEE Cafes and Pizza Hut WOW, enabled us to broaden our addressable market and capture new customer demand, reaching 500 and 150 stores, respectively.”
Wat concluded, “We see ample opportunities across China to enter underserved markets and enhance customer access. With tailored store models, we are accelerating franchise store openings to unlock additional opportunities. Our franchise strategy focuses on accessing strategic and remote locations as well as lower tier cities previously beyond our reach. We anticipate the franchise mix of net new stores will gradually increase to 40-50% for KFC and 20-30% for Pizza Hut over the next few years. Looking ahead, we are committed to returning excess capital to shareholders as we continue investing in driving business growth. With our confidence in our cash generating capabilities, we plan to step up capital returns to shareholders, increasing from $3 billion to $4.5 billion between 2024 and 2026.”
[1] Core operating profit is defined as operating profit adjusted for special items, further excluding items affecting comparability and the impact of F/X. The Company uses core operating profit for the purposes of evaluating the performance of its core operations. Please refer to “Reconciliation of Reported GAAP Results to Non-GAAP Measures” included in the accompanying tables of this release for further details.
[2] Net new unit contribution refers to sales contribution from net new stores.
[3] OP margin refers to operating profit as a percentage of total revenues.
[4] Digital sales refer to sales at Company-owned stores where orderings were placed digitally.
Key Financial Results
Third Quarter
Year to Date Ended 9/30
%/ppts Change
%/ppts Change
2024
2023
Reported
Ex F/X
2024
2023
Reported
Ex F/X
System Sales Growth (5) (%)
4
15
NM
NM
5
20
NM
NM
Same-Store Sales Growth (5) (%)
(3)
4
NM
NM
(3)
8
NM
NM
Operating Profit ($mn)
371
323
+15
+14
1,011
996
+1
+5
Adjusted Operating Profit (6) ($mn)
371
327
+13
+13
1,011
1,005
+1
+4
Core Operating Profit (6)(7) ($mn)
369
312
NM
+18
1,040
951
NM
+10
OP Margin (%)
12.1
11.1
+1.0
+1.0
11.6
11.7
(0.1)
—
Core OP Margin (6)(8) (%)
12.1
10.7
NM
+1.4
11.7
11.2
NM
+0.5
Net Income ($mn)
297
244
+22
+21
796
730
+9
+12
Adjusted Net Income (6) ($mn)
297
248
+20
+19
796
739
+8
+11
Diluted Earnings
Per Common Share ($)
0.77
0.58
+33
+32
2.03
1.73
+17
+20
Adjusted Diluted Earnings
Per Common Share (6) ($)
0.77
0.59
+31
+30
2.03
1.75
+16
+19
[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.
Stepping Up Capital Returns to Shareholders
KFC
Third Quarter
Year to Date Ended 9/30
%/ppts Change
%/ppts Change
2024
2023
Reported
Ex F/X
2024
2023
Reported
Ex F/X
Restaurants
11,283
9,917
+14
NM
11,283
9,917
+14
NM
System Sales Growth (%)
6
15
NM
NM
6
21
NM
NM
Same-Store Sales Growth (%)
(2)
4
NM
NM
(2)
9
NM
NM
Total Revenues ($mn)
2,311
2,186
+6
+5
6,555
6,368
+3
+5
Operating Profit ($mn)
364
342
+6
+6
1,000
1,035
(3)
(1)
Core Operating Profit ($mn)
362
