News

Yum China Q2 revenues up, margins down

July 31, 2019

Yum China second-quarter financials indicated the brand grew revenues 3% or 10% in constant currencies, while total system sales grew 10% year over year, fueled by 12% growth for KFC and 4% growth for Pizza Hut, a news release said. 

The results for the most recent period that ended on June 30, 2019 indicated revenues increased to $2.12 billion from $2.07 billion, while same-store sales increased 4% year over year, with a 5% increase at KFC and 1% growth at Pizza Hut, excluding constant currencies.

Other key results of the company's Q2 performance, include:

• Restaurant margin fell from 15.1% last year's quarter to 14.7% this year.
• Operating profit grew 6% year over year to $204 million.
• Net income increased 24% to $178 million.
• Diluted EPS increased 28% to $0.46 from $0.36 in the prior year period.
• Opened 178 new restaurants during the quarter, bringing total store count to 8,751.

The increase in net income was primarily due to increased operating profits and a market-to-market gain from the company's equity investment in Meituan Dianping, according to the financial report.  

"Looking forward, we expect overall sales growth to moderate as KFC begins to lap several key sales drivers, including successful value campaigns that we initiated in the second half of 2018," Yum China CEO Joey Wat said in the release. "However, we remain confident that our strong foundation and commitment to innovation throughout our business will power continued growth for Yum China. We will continue to create new and exciting menu items and leverage our leadership in digital, data and delivery to meet the evolving needs of our consumers."

CFO Jacky Lo added that the company expanded its KFC store count to 8,751 units nationwide in China by the end of the quarter as part of a continuing plan to grow the brand's footprint this year. 

"We now expect full year 2019 gross new store openings to be between 800 and 850 units with accelerating development of new units across multiple brands," Lo said. "The ongoing expansion and strong operating performance fueled robust free cash flow generation in the second quarter, enabling us to return capital to our shareholders by repurchasing $75 million of shares and paying $45 million in dividends during the period."

The company's board declared a cash dividend of $0.12 per share on Yum China's common stock, payable at the close of business Sept. 17 to stockholders of record at business close on Aug. 27.