News

Pizza Hut performance drags down Yum China Q2 results

August 2, 2018

Yum China reported an overall 1 percent dip in same-store sales for the company during Q2 2018, stemming from a hefty 4-percent drop in its Pizza Hut brand's same-store sales for the quarter ending June 30. The stronger KFC brand in China buoyed the company's results for the quarter, with its 5-percent growth in system sales and flat same-store sales, bringing the company's total system sales up 3 percent year over year, a news release said. 

Other key year-over-year Q2 2018 highlights include: 

• 12 percent growth in total revenues to $2.1 billion.
• Restaurant margin fell to 15.1 percent, from 16.6 percent the previous year's quarter. 
• 13 percent (5 percent excluding foreign currency exchange) growth in operating profit to $193 million. 
• 14 percent growth (6 percent excluding currency exchange) in net income to $143 million.
• Diluted EPS grew to 36 cents from 31 cents the previous year quarter.  
• Opened 164 new restaurants for a total store count to 8,198 across more than 1,200 cities.

The KFC and Pizza Hut loyalty programs in China collectively added more than 70 million new members year over year, for a total of 180 million between the two brands currently. During the quarter, mobile payments across the system bounced up 21 percent over last year and now account for 63 percent of company sales. 

Likewise, delivery grew 3 percent to represent  16 percent of quarterly sales. Delivery services are now available in more than 1,000 Chinese cities. 

"We are on track to add 600 to 650 new stores, led by KFC, by the end of the year, Yum China CEO Joey Wat said in the release. "This growth strategy will set us up for long-term growth in both profitability and market share.  

"We are confident in the sustainability of KFC's leader position in the QSR market in China ... while Pizza Hut continued to face challenges in China's competitive casual dining space. ...We remain dedicated to revitalizing the brand and strongly believe that our initiatives including delivering more innovative products and introducing new store formats will restore the brand to the level of consistent growth that our shareholders expect." 

The company's board declared a 10-cent cash dividend on Yum China's common stock, payable Sept. 19, to stockholders of record as of the close of business on Aug. 29.