Profits hit $640m for Yum China Holdings

Yum China’s full-year operating profit of US$640 million was up 31 per cent led by margin expansion and restaurant openings.

Its CEO describes it as a “momentous” year for the group, licensee of Yum! Brands in Mainland China. It has exclusive rights on the mainland to KFC, Pizza Hut and Taco Bell, which opened its first restaurant in China at the end of the year. Yum China also owns the East Dawning and Little Sheep concepts outright.

Total system sales for the year grew 5 per cent, including growth of 6 per cent at KFC and 3 per cent at Pizza Hut Casual Dining, excluding foreign currency translation (F/X).

Same-store sales were flat, with an increase of 3 per cent at KFC offset by a decline of 7 per cent at Pizza Hut.

Yum China opened 575 restaurants during the year, representing 5 per cent growth, taking its total to more than 7500 outlets.

Currency impact

While retail tax structure reform helped profit growth, this was negatively impacted to the tune of $36 million by foreign currency translation. Excluding F/X and special items, operating profit grew 37 per cent.

For its fourth quarter, Yum China’s total system sales grew 4 per cent, including growth of 4 per cent at KFC and 6 per cent at Pizza Hut, excluding F/X.

Same-store sales were flat, rising 1 per cent at KFC and offset by a 3 per cent decline at Pizza Hut.
The group opened 302 restaurants during the quarter.

Foreign currency translation negatively impacted operating profit by $5 million.

CEO Micky Pant says Yum China became an independent, publicly traded company while simultaneously improving its business performance and investing for future growth.

“We continue to focus on our long-term growth formula: new unit development, same-store sales growth, and continued restaurant margin improvement. Right now, our top priority is consistently delivering positive same-store sales growth.”

Digital engagement

There was a focus on product innovation during the year, as well as restaurant refurbishing and digital engagement with customers.
Pant says it was a groundbreaking year in digital and delivery.

“Our loyalty programs have more than 80 million members –  ranked number one in the restaurant industry worldwide in terms of number of members.

“Total delivery sales reached about $700 million, and we were number one among restaurant operators in terms of online sales in China. Cashless payment accounted for about 30 per cent of our company sales.”
Pant says this year marks the 30th anniversary of the launch of KFC in China, and he believes most the company’s restaurants in China are yet to be built.

Members in the loyalty programs grew to more than 60 million for KFC and more than 20 million for Pizza Hut.

Mobile payments reached about 17 per cent of company sales for the year, while cashless payment methods were used for more than $2 billion in company sales.

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