News

Yum China FY19 results rosy, but 2020 coronavirus pulls business back

Logo: Yum China

February 6, 2020

After watching its stock soar 43% last year, Yum China's latest financials are already sending investors to the sell column as the company makes clear that the coronavirus is packing a nasty punch to its financial picture. The virus, which was first documented in the city of Wuhan in China's Hubei province, has led the multi-QSR company to close about 30% of its Chinese stores, according to its Q4 financial report today for the period ending on Dec. 31, 2019. 

As word got out, that sent the stock down overnight, dropping 3.7% in late trading in New York. That contrasts with the rosy picture painted in the last part of 2019, before the virus really took hold in China, when Yum China said its Q4 total system sales grew 8% and same-store sales grew 2% in constant currency, while the company opened 1,006 new stores in 2019 alone. 

Other Q4 highlights include: 

• Total revenues increased 6% year over year to $2.03 billion from $1.91 billion.
• Total system sales grew 8% year over year, with growth of 10% at KFC and 1% at Pizza Hut.
• Same-store sales grew 2% year over year, with a 3% increase at KFC and flat same-store sales at Pizza Hut.
• Restaurant margin was 12.4%, compared with 11.5% in the prior year period.
• Operating profit increased 14% year over year to $94 million from $84 million. 
• Net income increased 22% to $90 million from $74 million in the prior year period. 
• Adjusted net income increased to $98 million from $46 million in the prior year period. 
• Diluted EPS increased 21% to 23 cents from 19 cents the prior year period, while adjusted diluted EPS increased to 25 cents from 12 cents the prior year period. 

For the full year in 2019, results include: 

• Total revenues increased 4% year over year to $8.78 billion from $8.42 billion.
• Total system sales grew 9% year over year, with growth of 11% at KFC and 3% at Pizza Hut.
• Same-store sales increased 3% year over year, with a 4% increase at KFC and a 1% increase at Pizza Hut. 
• Restaurant margin was 16%, compared with 15.7% in the prior year.
• Operating profit decreased 4% year over year to $901 million from $941 million. 
• Net income increased 1% to $713 million from $708 million in the prior year. 
• Diluted EPS increased 3% to $1.84 from $1.79 in the prior year. 

But 2020 is bringing dismal news to the company with the near-simultaneous virus outbreak with the new year, as CEO Joey Wat said in his report to the company. 

"Looking into 2020, the coronavirus outbreak is a major public health situation in China," Wat said in the report. "Our top priority is the health and safety of our employees and customers. We have implemented various preventative measures across our restaurants and other workplaces to help protect our employees and customers. 

"We will continue to monitor this fluid situation and respond accordingly. Despite this challenge and disruption to our business, we remain confident in the long-term market potential in China. We are differentiated by our world-class development, operations and innovation capabilities, which drove our success in the past and will help sustain our growth for years to come."

The company's board said the 12-cent per share dividend on common stock will be paid to shareholders of record on March 4, to be paid on March 25.