On August 5, 2024, Yum China Holdings Inc (YUMC, Financial) released its 8-K filing reporting unaudited results for the second quarter ended June 30, 2024. Yum China, the largest restaurant chain in China with nearly 13,000 units and USD 10 billion in systemwide sales in 2022, continues to generate revenue through its own restaurants and franchise fees. The company operates well-known brands such as KFC, Pizza Hut, Little Sheep, East Dawning, Taco Bell, Huang Ji Huang, COFFii & Joy, and Lavazza.
Performance Highlights
Yum China Holdings Inc (YUMC, Financial) reported a 1% year-over-year (YoY) increase in total revenues to $2.68 billion, slightly below the analyst estimate of $2.77 billion. However, the company achieved a record second-quarter operating profit of $266 million, up 4% YoY, and a diluted EPS of $0.55, surpassing the analyst estimate of $0.46.
Key Financial Metrics
| Metric | Q2 2024 | Q2 2023 | % Change |
|---|---|---|---|
| Total Revenues ($mn) | 2,679 | 2,654 | 1% |
| Operating Profit ($mn) | 266 | 257 | 4% |
| Diluted EPS ($) | 0.55 | 0.47 | 17% |
| Net Income ($mn) | 212 | 197 | 8% |
Operational Achievements
The company opened 401 net new stores in the quarter, bringing the total store count to 15,423. This includes 10,931 KFC stores and 3,504 Pizza Hut stores. Notably, 99 net new stores were opened by franchisees. Same-store sales reached 96% of the prior year's level, with same-store transactions growing 4% YoY.
Delivery sales grew 11% YoY, contributing approximately 38% of KFC and Pizza Hut's company sales. Digital sales reached $2.2 billion, with digital ordering accounting for approximately 90% of total company sales. The total membership of KFC and Pizza Hut exceeded 495 million, with member sales accounting for over 65% of system sales in aggregate.
Challenges and Strategic Initiatives
Despite the positive results, Yum China faced challenges such as increased value-for-money offerings to drive traffic and wage inflation. However, the company managed to stabilize restaurant margins through improved operational efficiencies and favorable commodity prices.
Joey Wat, CEO of Yum China, commented, “We achieved our most profitable second quarter since the spin-off, with core operating profit growing by 12% despite challenging industry dynamics. Our sharp focus on value-for-money and innovative new products worked well, driving robust same-store transaction growth.”
Segment Performance
KFC: System sales for KFC grew 5% YoY, driven by net new unit contribution of 8%. The brand opened 328 net new stores, with 74 net new stores opened by franchisees. Operating profit was $264 million, with a core operating profit of $273 million, up 4% YoY. Delivery sales grew 12% YoY, contributing approximately 38% of KFC’s company sales.
Pizza Hut: System sales for Pizza Hut grew 1% YoY, driven by net new unit contribution of 8%. The brand opened 79 net new stores, reaching a total of 3,504 stores. Operating profit grew 13% YoY to $40 million, with a core operating profit of $41 million, up 23% YoY. Delivery sales grew 6%, contributing approximately 38% of Pizza Hut’s company sales.
Returns to Shareholders
Yum China returned $249 million to shareholders in the second quarter through share repurchases and cash dividends. Year to date, the company has returned nearly $1 billion to shareholders, exceeding its full-year 2023 returns. The board of directors declared a cash dividend of $0.16 per share, payable on September 17, 2024.
For more detailed financial information, please refer to the full 8-K filing.
Explore the complete 8-K earnings release (here) from Yum China Holdings Inc for further details.
