Yum China opens 692 stores as comparable sales remain below last year
Yum China added a record 692 net stores during the third quarter, taking its network close to twenty thousand locations. Revenue and operating profit increased, although comparable-store sales remained below the year-earlier level. More customer transactions and a larger delivery business accompanied the expansion. The company also completed its mainland China purchase of the Pizza Hut brand during the quarter. Franchisees accounted for 44 per cent of openings.
Economics & Markets··Night
Store expansion accompanies higher revenue
Restaurant operator Yum China ended September with 19,989 stores after adding a net 692 locations during the third quarter. That was its largest quarterly net addition. Franchisees accounted for 44 per cent of the openings and operated 19 per cent of the total estate at quarter-end. The company’s unaudited results cover the three months through 30 September.[1]
Quarterly revenue rose 8 per cent to 3.5 billion dollars, or 2 per cent with currency translation excluded. Zacks found that revenue fell short of its consensus estimate, while adjusted quarterly earnings met expectations. The company’s total system sales, which track the wider restaurant network, increased 3 per cent excluding exchange-rate effects.[1], [2]
More transactions leave comparable sales below last year
Sales from comparable stores stood at 97 per cent of the year-earlier level. Transactions at those stores nevertheless increased 3 per cent, marking their fifteenth consecutive quarter of growth. More purchases therefore accompanied a lower comparable sales total. The company reported those measures separately from the revenue growth of its expanding overall business.[1]
Delivery represented approximately 54 per cent of company sales, against 51 per cent a year earlier. Higher delivery costs were among the factors offsetting the benefit of streamlined operations and favorable commodity prices. Value offers and weaker sales leverage also affected margins. The company completed its acquisition of the Pizza Hut brand in mainland China on 7 August.[1]
Operating margin widens and shareholders receive cash
Operating profit increased 13 per cent to 451 million dollars, taking the operating margin from 12.5 per cent to 13.0 per cent. Restaurant margin improved by 50 basis points to 17.8 per cent. Diluted earnings per share rose from 0.76 dollars to 0.91 dollars. During the quarter, shareholders received 362 million dollars through 263 million dollars in repurchases and 99 million dollars in cash dividends. Favorable commodity prices helped the margin improvement.[1]
