Yum China Reports Second Quarter Results
08/05/2024 at 4:30 PM EDT

Record Second Quarter Revenue Led by Same-store Transaction Growth and New Unit Growth
Improved OP Margin and Achieved Record Second Quarter Operating Profit
Operating Profit Grew 4%, Core Operating Profit1 Grew 12%, Diluted EPS Grew 17%
Record First Half Openings of 779 Net New Stores and Cash Returns to Shareholders of Nearly $1 Billion

SHANGHAI, China, Aug. 5, 2024 /PRNewswire/ -- Yum China Holdings, Inc. (the "Company" or "Yum China") (NYSE: YUMC and HKEX: 9987) today reported unaudited results for the second quarter ended June 30, 2024.

Second Quarter Highlights

  • Total system sales grew 4% year over year ("YoY"), excluding foreign currency translation ("F/X"), on top of last year's high base. The growth was primarily attributable to 8% of net new unit contribution.2
  • Total store count reached 15,423 as of June 30, 2024, including 10,931 KFC stores and 3,504 Pizza Hut stores. The Company opened 401 net new stores in the quarter. 99 net new stores, or 25%, were opened by franchisees.
  • Total revenues increased 1% YoY to $2.68 billion, a record-high for the second quarter. Excluding F/X, total revenues would have been $85 million higher, or a 4% increase YoY.
  • Same-store sales reached 96% of the prior year's level. Same-store transactions grew 4% YoY.
  • Operating profit grew 4% YoY to $266 million, a record level for the second quarter. Excluding F/X, operating profit would have been $9 million higher, or a 7% increase YoY. Core operating profit1 grew 12% YoY to $275 million.
  • OP Margin3 was 9.9%, an increase of 20 basis points YoY, supported by resilient restaurant margins and savings in G&A expenses.
  • Restaurant margin was 15.5%. Excluding $12 million in items affecting comparability, restaurant margin was approximately the same as the second quarter last year. Improvement in operational efficiencies supported margin stability.
  • Diluted EPS increased 17% YoY to $0.55, a record level for the second quarter, or up 19% YoY excluding F/X.
  • Delivery sales grew 11% YoY, maintaining the double-digit growth Yum China has carried over the past decade. Delivery contributed approximately 38% of KFC and Pizza Hut's Company sales.
  • Digital sales4 reached $2.2 billion, with digital ordering accounting for approximately 90% of total Company sales.
  • Total membership of KFC and Pizza Hut exceeded 495 million. Member sales accounted for over 65% of KFC and Pizza Hut's system sales in aggregate.
  • 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.

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. We took proactive actions to improve operational efficiency, stabilizing restaurant margin and expanding OP margin year over year."

Wat added, "By reducing the complexity of menus and operations, and harnessing the power of automation and AI, we improved operational efficiency. These measures gave us the flexibility to invest in menu innovation and compete on value. KFC has successfully gained market share on delivery platforms by expanding its price range and lowering delivery fees. Pizza Hut attracted value-conscious customers with its entry-price pizzas and solo diners with its Pizza Dough Burger. Our business model breakthroughs enabled us to broaden our addressable market and capture more customer occasions. Our side-by-side KCOFFEE cafe and Pizza Hut WOW store model delivered incremental sales and showed great future potential. Our new stores maintained good returns, with a consistent payback period of 2 years for KFC and an improved level of 2 to 3 years for Pizza Hut. With our industry-leading capabilities and scale, we are turning challenges to our competitive advantage. We believe that we are well positioned to capture the long-term growth opportunities in China and, ultimately, create enduring value for our shareholders." 

[1] Core operating profit is defined as operating profit adjusted for special items, further excluding items affecting comparability and the impact of F/X. The Company uses core
operating profit for the purposes of evaluating the performance of its core operations. Please refer to "Reconciliation of Reported GAAP Results to Non-GAAP Measures" included in
the accompanying tables of this release for further details.

[2] Net new unit contribution refers to sales contribution from net new stores.

[3] OP margin refers to operating profit as a percentage of total revenues.

[4] Digital sales refer to sales at Company-owned stores where orderings were placed digitally.

Key Financial Results

 

Second Quarter

     

Year to Date Ended 6/30

 
             

%/ppts Change

                 

%/ppts Change

 
 

2024

   

2023

   

Reported

   

Ex F/X

     

2024

   

2023

   

Reported

   

Ex F/X

 

System Sales Growth (5) (%)

 

4

     

32

   

NM

   

NM

       

5

     

24

   

NM

   

NM

 

Same-Store Sales Growth (5) (%)

 

(4)

     

15

   

NM

   

NM

       

(3)

     

11

   

NM

   

NM

 

Operating Profit ($mn)

 

266

     

257

     

+4

     

+7

       

640

     

673

     

(5)

     

 

Adjusted Operating Profit (6) ($mn)

 

266

     

259

     

+3

     

+6

       

640

     

678

     

(6)

     

(1)

 

Core Operating Profit (6) (7) ($mn)

 

275

     

247

   

NM

     

+12

       

671

     

639

   

NM

     

+5

 

OP Margin (%)

 

9.9

     

9.7

     

+0.2

     

+0.2

       

11.4

     

12.1

     

(0.7)

     

(0.7)

 

Core OP Margin (6) (8) (%)

 

10.0

     

9.3

   

NM

     

+0.7

       

11.4

     

11.5

   

NM

     

(0.1)

 

Net Income ($mn)

 

212

     

197

     

+8

     

+11

       

499

     

486

     

+3

     

+7

 

Adjusted Net Income (6) ($mn)

 

212

     

199

     

+7

     

+10

       

499

     

491

     

+2

     

+6

 

Diluted Earnings
  Per Common Share ($)

 

0.55

     

0.47

     

+17

     

+19

       

1.26

     

1.15

     

+10

     

+14

 

Adjusted Diluted Earnings
  Per Common Share (6) ($)

 

0.55

     

0.47

     

+17

     

+19

       

1.26

     

1.16

     

+9

     

+13

 
 

[5] System sales and same-store sales percentages exclude the impact of F/X. Effective January 1, 2018, temporary store closures are normalized in the same-store sales
calculation by excluding the period during which stores are temporarily closed.

[6] See "Reconciliation of Reported GAAP Results to Non-GAAP Measures" included in the accompanying tables of this release for further details.

[7] Current period amounts are derived by translating results at average exchange rates of the prior year period.

[8] Core OP margin refers to core operating profit as a percentage of total revenues excluding F/X.

Note:  All comparisons are versus the same period a year ago.

Percentages may not recompute due to rounding.

NM refers to not meaningful.

 

KFC

 

Second Quarter

 

Year to Date Ended 6/30

 
             

%/ppts Change

             

%/ppts Change

 
 

2024

   

2023

   

Reported

   

Ex F/X

 

2024

   

2023

   

Reported

   

Ex F/X

 

Restaurants

 

10,931

     

9,562

     

+14

   

NM

   

10,931

     

9,562

     

+14

   

NM

 

System Sales Growth (%)

 

5

     

32

   

NM

   

NM

   

6

     

24

   

NM

   

NM

 

Same-Store Sales Growth (%)

 

(3)

     

15

   

NM

   

NM

   

(3)

     

11

   

NM

   

NM

 

Total Revenues ($mn)

 

2,014

     

1,984

     

+2

     

+5

   

4,244

     

4,182

     

+2

     

+6

 

Operating Profit ($mn)

 

264

     

273

     

(3)

     

   

636

     

693

     

(8)

     

(4)

 

Core Operating Profit ($mn)

 

273

     

263

   

NM

     

+4

   

665

     

659

   

NM

     

+1

 

Restaurant Margin (%)

 

16.2

     

17.3

     

(1.1)

     

(1.1)

   

17.8

     

19.9

     

(2.1)

     

(2.1)

 
  • System sales for KFC grew 5% YoY for the quarter, on top of high base last year, primarily driven by net new unit contribution of 8%.
  • KFC opened 328 net new stores during the quarter. 74 net new stores, or 23%, were opened by franchisees. Total store count reached 10,931 as of June 30, 2024.
  • Operating profit was $264 million. Core operating profit was $273 million for the quarter, up 4% YoY.
  • Restaurant margin was 16.2% for the quarter. Excluding items affecting comparability, restaurant margin decreased by 60 basis points against a strong comparison in the second quarter of 2023, primarily due to increased value-for-money offerings to drive traffic and wage inflation, partially offset by favorable commodity prices and improved operational efficiency.
  • Delivery sales grew 12% YoY, contributing approximately 38% of KFC's Company sales for the quarter. Off-premises dining accounted for approximately 67% of KFC's Company sales.

Pizza Hut

 

Second Quarter

 

Year to Date Ended 6/30

 
             

%/ppts Change

             

%/ppts Change

 
 

2024

   

2023

   

Reported

   

Ex F/X

 

2024

   

2023

   

Reported

   

Ex F/X

 

Restaurants

 

3,504

     

3,072

     

+14

   

NM

   

3,504

     

3,072

     

+14

   

NM

 

System Sales Growth (%)

 

1

     

30

   

NM

   

NM

   

3

     

23

   

NM

   

NM

 

Same-Store Sales Growth (%)

 

(8)

     

13

   

NM

   

NM

   

(7)

     

10

   

NM

   

NM

 

Total Revenues ($mn)

 

540

     

554

     

(2)

     

+1

   

1,135

     

1,151

     

(1)

     

+3

 

Operating Profit ($mn)

 

40

     

35

     

+13

     

+18

   

87

     

90

     

(4)

     

+1

 

Core Operating Profit ($mn)

 

41

     

34

   

NM

     

+23

   

91

     

86

   

NM

     

+8

 

Restaurant Margin (%)

 

13.2

     

12.4

     

+0.8

     

+0.8

   

12.8

     

13.3

     

(0.5)

     

(0.5)

 
  • System sales for Pizza Hut grew 1% YoY for the quarter, on top of high base last year, primarily driven by net new unit contribution of 8%.
  • Pizza Hut opened 79 net new stores during the quarter. Total store count reached 3,504 as of June 30, 2024.
  • Operating profit grew 13% YoY to $40 million, a record level for the second quarter. Core operating profit was $41 million, up 23% YoY.
  • Restaurant margin was 13.2% for the quarter. Excluding items affecting comparability, restaurant margin was up 110 basis points YoY. Higher operational efficiency offset the impact of increased value-for-money offerings and wage inflation, resulting in an increased margin.
  • Delivery sales grew 6%, contributing approximately 38% of Pizza Hut's Company sales for the quarter. Off-premises dining accounted for approximately 48% of Pizza Hut's Company sales.

Returns to Shareholders

  • Yum China repurchased 5.1 million shares of common stock for $187 million in the quarter. As of June 30, 2024, $666 million remained available for future share repurchases under the current authorization program.
  • Yum China's board of directors declared a cash dividend of $0.16 per share on Yum China's common stock, payable on September 17, 2024 to shareholders of record as of the close of business on August 27, 2024.
  • In the first half of 2024, the Company returned a record $994 million to shareholders, including buying back 21.7 million shares of common stock, which is equivalent to over 5% of its outstanding shares as of December 31, 2023.

Outlook

The Company's targets for the 2024 fiscal year remain unchanged from the prior period's disclosures.

  • Open approximately 1,500 to 1,700 net new stores.
  • Make capital expenditures in the range of approximately $700 million to $850 million.
  • Return a Company record-setting $1.5 billion to shareholders through quarterly cash dividends and share repurchases.

Note on Non-GAAP Measures

Reported GAAP results include items that are excluded from non-GAAP measures. See "Reconciliation of Reported GAAP Results to Non-GAAP Measures" and "Segment Results" within this release for non-GAAP reconciliation details.

Conference Call

Yum China's management will hold an earnings conference call at 8:00 p.m. U.S. Eastern Time on Monday, August 5, 2024 (8:00 a.m. Beijing/Hong Kong Time on Tuesday, August 6, 2024).

A live webcast of the call may be accessed at https://edge.media-server.com/mmc/p/qibtjiz2.

To join by phone, please register in advance of the conference through the link provided below. Upon registering, you will be provided with participant dial-in numbers, a passcode and a unique access PIN.

Pre-registration link:            https://s1.c-conf.com/diamondpass/10039799-9htky1.html 

A replay of the conference call will be available one hour after the call ends until Tuesday, August 13, 2024 and may be accessed by phone at the following numbers:

U.S.:

1 855 883 1031

Mainland China:

400 1209 216

Hong Kong:

800 930 639

U.K.:

0800 031 4295

   

Replay PIN:

10039799

Additionally, this earnings release, the accompanying slides, as well as the live and archived webcast of this conference call will be available at Yum China's Investor Relations website at http://ir.yumchina.com

For important news and information regarding Yum China, including our filings with the U.S. Securities and Exchange Commission and the Hong Kong Stock Exchange, visit Yum China's Investor Relations website at http://ir.yumchina.com. Yum China uses this website as a primary channel for disclosing key information to its investors, some of which may contain material and previously non-public information.

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including under "2024 Outlook." We intend all forward-looking statements to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the fact that they do not relate strictly to historical or current facts and by the use of forward-looking words such as "expect," "expectation," "believe," "anticipate," "may," "could," "intend," "belief," "plan," "estimate," "target," "predict," "project," "likely," "will," "continue," "should," "forecast," "outlook," "commit" or similar terminology. These statements are based on current estimates and assumptions made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we believe are appropriate and reasonable under the circumstances, but there can be no assurance that such estimates and assumptions will prove to be correct. Forward-looking statements include, without limitation, statements regarding the future strategies, growth, business plans, investments, store openings, capital expenditures, dividend and share repurchase plans, CAGR for system sales, operating profit and EPS, earnings, performance and returns of Yum China, anticipated effects of population and macroeconomic trends, pace of recovery of Yum China's business, the anticipated effects of our innovation, digital and delivery capabilities and investments on growth and beliefs regarding the long-term drivers of Yum China's business. Forward-looking statements are not guarantees of performance and are inherently subject to known and unknown risks and uncertainties that are difficult to predict and could cause our actual results or events to differ materially from those indicated by those statements. We cannot assure you that any of our expectations, estimates or assumptions will be achieved. The forward-looking statements included in this press release are only made as of the date of this press release, and we disclaim any obligation to publicly update any forward-looking statement to reflect subsequent events or circumstances, except as required by law. Numerous factors could cause our actual results or events to differ materially from those expressed or implied by forward-looking statements, including, without limitation: whether we are able to achieve development goals at the times and in the amounts currently anticipated, if at all, the success of our marketing campaigns and product innovation, our ability to maintain food safety and quality control systems, changes in public health conditions, our ability to control costs and expenses, including tax costs, as well as changes in political, economic and regulatory conditions in China, and those set forth under the caption "Risk Factors" in our Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q). In addition, other risks and uncertainties not presently known to us or that we currently believe to be immaterial could affect the accuracy of any such forward-looking statements. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. You should consult our filings with the Securities and Exchange Commission (including the information set forth under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q) for additional detail about factors that could affect our financial and other results.

About Yum China Holdings, Inc.

Yum China is the largest restaurant company in China with a mission to make every life taste beautiful. The Company has approximately 400,000 employees and operates over 15,000 restaurants under six brands across more than 2,100 cities in China. KFC and Pizza Hut are the leading brands in the quick-service and casual dining restaurant spaces in China, respectively. In addition, Yum China has partnered with Lavazza to develop the Lavazza coffee concept in China. Little Sheep and Huang Ji Huang specialize in Chinese cuisine. Taco Bell offers innovative Mexican-inspired food. Yum China has a world-class, digitalized supply chain, which includes an extensive network of logistics centers nationwide and an in-house supply chain management system. Its strong digital capabilities and loyalty program enable the Company to reach customers faster and serve them better. Yum China is a Fortune 500 company with the vision to be the world's most innovative pioneer in the restaurant industry. For more information, please visit http://ir.yumchina.com.

Contacts

Investor Relations Contact:

   

Tel: +86 21 2407 7556

IR@YumChina.com  

 

     

Media Contact:

   

Tel: +86 21 2407 8288 / +852 2267 5807

Media@YumChina.com 

 

 

 

Yum China Holdings, Inc.

Condensed Consolidated Statements of Income

(in US$ million, except per share data)

(unaudited)

                             
   

Quarter Ended

 

% Change

 

Year to Date Ended

 

% Change

   

6/30/2024

 

6/30/2023

 

B/(W)

 

6/30/2024

 

6/30/2023

 

B/(W)

Revenues

                           

Company sales

 

$         2,528

 

$         2,517

 

   

$         5,322

 

$         5,289

 

1

 

Franchise fees and income

 

22

 

21

 

   

47

 

46

 

1

 

Revenues from transactions with franchisees

 

96

 

89

 

8

   

203

 

182

 

11

 

Other revenues

 

33

 

27

 

20

   

65

 

54

 

19

 

Total revenues

 

2,679

 

2,654

 

1

   

5,637

 

5,571

 

1

 

Costs and Expenses, Net

                           

Company restaurants

                           

     Food and paper

 

797

 

773

 

(3)

   

1,693

 

1,608

 

(5)

 

     Payroll and employee benefits

 

666

 

665

 

   

1,374

 

1,348

 

(2)

 

     Occupancy and other operating expenses

 

674

 

675

 

   

1,371

 

1,366

 

 

Company restaurant expenses

 

2,137

 

2,113

 

(1)

   

4,438

 

4,322

 

(3)

 

General and administrative expenses

 

133

 

153

 

13

   

273

 

316

 

14

 

Franchise expenses

 

9

 

9

 

(6)

   

19

 

19

 

(3)

 

Expenses for transactions with franchisees

 

92

 

84

 

(8)

   

196

 

175

 

(11)

 

Other operating costs and expenses

 

29

 

24

 

(22)

   

58

 

48

 

(21)

 

Closures and impairment expenses, net

 

13

 

14

 

13

   

14

 

17

 

18

 

Other (income) expenses, net

 

 

 

 NM 

   

(1)

 

1

 

 NM 

 

Total costs and expenses, net

 

2,413

 

2,397

 

(1)

   

4,997

 

4,898

 

(2)

 

Operating Profit

 

266

 

257

 

4

   

640

 

673

 

(5)

 

Interest income, net

 

31

 

40

 

(21)

   

69

 

78

 

(11)

 

Investment gain (loss)

 

8

 

(11)

 

 NM 

   

16

 

(28)

 

 NM 

 

Income Before Income Taxes and
  Equity in Net Earnings (Losses) from
  Equity Method Investments

 

305

 

286

 

7

   

725

 

723

 

 

Income tax provision

 

(77)

 

(71)

 

(9)

   

(190)

 

(196)

 

3

 

Equity in net earnings (losses) from
   equity method investments

 

 

(1)

 

47

   

 

 

8

 

Net income – including noncontrolling interests

 

228

 

214

 

7

   

535

 

527

 

2

 

Net income – noncontrolling interests

 

16

 

17

 

5

   

36

 

41

 

12

 

Net Income – Yum China Holdings, Inc.

 

$            212

 

$            197

 

8

   

$            499

 

$            486

 

3

 

Effective tax rate

 

25.2 %

 

24.7 %

 

(0.5)

 ppts. 

 

26.2 %

 

27.0 %

 

0.8

 ppts. 

                             

Basic Earnings Per Common Share

 

$           0.55

 

$           0.47

       

$           1.27

 

$           1.16

     

Weighted-average shares outstanding
    (in millions)

 

389

 

418

       

395

 

418

     
                             

Diluted Earnings Per Common Share

 

$           0.55

 

$           0.47

       

$           1.26

 

$           1.15

     

Weighted-average shares outstanding
    (in millions)

 

391

 

422

       

397

 

423

     
                             

Company sales

 

100.0 %

 

100.0 %

       

100.0 %

 

100.0 %

     

Food and paper

 

31.5

 

30.7

 

(0.8)

 ppts. 

 

31.8

 

30.4

 

(1.4)

ppts.

Payroll and employee benefits

 

26.3

 

26.4

 

0.1

 ppts. 

 

25.8

 

25.5

 

(0.3)

ppts.

Occupancy and other operating expenses

 

26.7

 

26.8

 

0.1

 ppts. 

 

25.8

 

25.8

 

ppts.

Restaurant margin

 

15.5 %

 

16.1 %

 

(0.6)

 ppts. 

 

16.6 %

 

18.3 %

 

(1.7)

ppts.

                             

Percentages may not recompute due to rounding. NM refers to not meaningful.

 

 

 

Yum China Holdings, Inc.

KFC Operating Results

(in US$ million)

(unaudited)

                             
   

Quarter Ended

 

% Change

 

Year to Date Ended

 

% Change

   

6/30/2024

 

6/30/2023

 

B/(W)

 

6/30/2024

 

6/30/2023

 

B/(W)

Revenues

                           

Company sales

 

$         1,983

 

$         1,954

 

1

   

$         4,176

 

$         4,120

 

1

 

Franchise fees and income

 

16

 

15

 

7

   

34

 

32

 

7

 

Revenues from transactions with franchisees

 

12

 

11

 

22

   

26

 

21

 

26

 

Other revenues

 

3

 

4

 

(21)

   

8

 

9

 

(14)

 

Total revenues

 

2,014

 

1,984

 

2

   

4,244

 

4,182

 

2

 

Costs and Expenses, Net

                           

Company restaurants

                           

     Food and paper

 

626

 

602

 

(4)

   

1,320

 

1,248

 

(6)

 

     Payroll and employee benefits

 

513

 

498

 

(3)

   

1,055

 

1,010

 

(4)

 

     Occupancy and other operating expenses

 

524

 

516

 

(1)

   

1,059

 

1,043

 

(2)

 

Company restaurant expenses

 

1,663

 

1,616

 

(3)

   

3,434

 

3,301

 

(4)

 

General and administrative expenses

 

60

 

67

 

10

   

121

 

135

 

10

 

Franchise expenses

 

8

 

7

 

(5)

   

17

 

16

 

(3)

 

Expenses for transactions with franchisees

 

11

 

9

 

(18)

   

23

 

18

 

(22)

 

Other operating costs and expenses

 

2

 

4

 

32

   

6

 

8

 

18

 

Closures and impairment expenses, net

 

6

 

8

 

14

   

7

 

9

 

14

 

Other expenses, net

 

 

 

5

   

 

2

 

89

 

Total costs and expenses, net

 

1,750

 

1,711

 

(2)

   

3,608

 

3,489

 

(3)

 

Operating Profit

 

$            264

 

$            273

 

(3)

   

$            636

 

$            693

 

(8)

 

Company sales

 

100.0 %

 

100.0 %

       

100.0 %

 

100.0 %

     

Food and paper

 

31.6

 

30.8

 

(0.8)

ppts.

 

31.6

 

30.3

 

(1.3)

ppts.

Payroll and employee benefits

 

25.9

 

25.5

 

(0.4)

ppts.

 

25.3

 

24.5

 

(0.8)

ppts.

Occupancy and other operating expenses

 

26.3

 

26.4

 

0.1

ppts.

 

25.3

 

25.3

 

ppts.

Restaurant margin

 

16.2 %

 

17.3 %

 

(1.1)

ppts.

 

17.8 %

 

19.9 %

 

(2.1)

ppts.

                             
                             

Percentages may not recompute due to rounding. 

 

 

 

 

Yum China Holdings, Inc.

 

Pizza Hut Operating Results

 

(in US$ million)

 

(unaudited)

 
                               
   

Quarter Ended

 

% Change

 

Year to Date Ended

 

% Change

 
   

6/30/2024

 

6/30/2023

 

B/(W)

 

6/30/2024

 

6/30/2023

 

B/(W)

 

Revenues

                             

Company sales

 

$            530

 

$            546

 

(3)

   

$         1,117

 

$         1,137

 

(2)

   

Franchise fees and income

 

2

 

2

 

4

   

4

 

4

 

2

   

Revenues from transactions with franchisees

 

1

 

1

 

6

   

2

 

2

 

(1)

   

Other revenues

 

7

 

5

 

36

   

12

 

8

 

55

   

Total revenues

 

540

 

554

 

(2)

   

1,135

 

1,151

 

(1)

   

Costs and Expenses, Net

                             

Company restaurants

                             

     Food and paper

 

167

 

166

 

(1)

   

365

 

350

 

(4)

   

     Payroll and employee benefits

 

150

 

162

 

8

   

312

 

329

 

5

   

     Occupancy and other operating expenses

 

143

 

151

 

5

   

297

 

307

 

3

   

Company restaurant expenses

 

460

 

479

 

4

   

974

 

986

 

1

   

General and administrative expenses

 

27

 

30

 

9

   

54

 

59

 

8

   

Franchise expenses

 

1

 

1

 

(5)

   

2

 

2

 

(1)

   

Expenses for transactions with franchisees

 

1

 

1

 

4

   

2

 

2

 

7

   

Other operating costs and expenses

 

6

 

4

 

(46)

   

11

 

7

 

(68)

   

Closures and impairment expenses, net

 

5

 

4

 

(6)

   

5

 

5

 

1

   

Total costs and expenses, net

 

500

 

519

 

4

   

1,048

 

1,061

 

1

   

Operating Profit

 

$              40

 

$              35

 

13

   

$              87

 

$              90

 

(4)

   

Company sales

 

100.0 %

 

100.0 %

       

100.0 %

 

100.0 %

       

Food and paper

 

31.6

 

30.3

 

(1.3)

ppts.

 

32.7

 

30.8

 

(1.9)

ppts.

 

Payroll and employee benefits

 

28.3

 

29.7

 

1.4

ppts.

 

27.9

 

28.9

 

1.0

ppts.

 

Occupancy and other operating expenses

 

26.9

 

27.6

 

0.7

ppts.

 

26.6

 

27.0

 

0.4

ppts.

 

Restaurant margin

 

13.2 %

 

12.4 %

 

0.8

ppts.

 

12.8 %

 

13.3 %

 

(0.5)

ppts.

 
                               
                               

Percentages may not recompute due to rounding. 

 

 

 

 

Yum China Holdings, Inc.

Condensed Consolidated Balance Sheets

(in US$ million)

         
   

6/30/2024

 

12/31/2023

   

(Unaudited)

   

ASSETS

       

Current Assets

       

Cash and cash equivalents

 

$    1,043

 

$    1,128

Short-term investments

 

1,434

 

1,472

Accounts receivable, net

 

74

 

68

Inventories, net

 

362

 

424

Prepaid expenses and other current assets

 

368

 

339

     Total Current Assets

 

3,281

 

3,431

Property, plant and equipment, net

 

2,314

 

2,310

Operating lease right-of-use assets

 

2,151

 

2,217

Goodwill

 

1,888

 

1,932

Intangible assets, net

 

146

 

150

Long-term bank deposits and notes

 

1,051

 

1,265

Equity investments

 

343

 

332

Deferred income tax assets

 

132

 

129

Other assets

 

262

 

265

   Total Assets

 

11,568

 

12,031

         

LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND EQUITY

       

Current Liabilities

       

Accounts payable and other current liabilities

 

2,149

 

2,164

Short-term borrowings

 

416

 

168

Income taxes payable

 

113

 

90

   Total Current Liabilities

 

2,678

 

2,422

Non-current operating lease liabilities

 

1,827

 

1,899

Non-current finance lease liabilities

 

46

 

44

Deferred income tax liabilities

 

386

 

390

Other liabilities

 

149

 

157

   Total Liabilities

 

5,086

 

4,912

         

Redeemable Noncontrolling Interest

 

13

 

13

         

Equity

       

Common stock, $0.01 par value; 1,000 million shares authorized; 387 million shares
    and 407 million shares issued at June 30, 2024 and December 31, 2023, respectively;
    386 million shares and 407 million shares outstanding at June 30 2024 and
    December 31, 2023, respectively.

 

4

 

4

Treasury stock

 

(17)

 

Additional paid-in capital

 

4,103

 

4,320

Retained earnings

 

2,048

 

2,310

Accumulated other comprehensive loss

 

(326)

 

(229)

    Total Yum China Holdings, Inc. Stockholders' Equity

 

5,812

 

6,405

Noncontrolling interests

 

657

 

701

    Total Equity

 

6,469

 

7,106

    Total Liabilities, Redeemable Noncontrolling Interest and Equity

 

$        11,568

 

$          12,031

 

 

 

Yum China Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(in US$ million)

(unaudited)

             
     

Year to Date Ended

     

6/30/2024

   

6/30/2023

Cash Flows – Operating Activities

           

Net income – including noncontrolling interests

   

$                        535

   

$                        527

Depreciation and amortization

   

235

   

228

Non-cash operating lease cost

   

203

   

202

Closures and impairment expenses

   

14

   

17

Investment (gain) loss

   

(16)

   

28

Equity in net (earnings) losses from equity method investments

   

   

Distributions of income received from equity method investments

   

7

   

8

Deferred income taxes

   

(2)

   

13

Share-based compensation expense

   

23

   

29

Changes in accounts receivable

   

(5)

   

2

Changes in inventories

   

52

   

1

Changes in prepaid expenses, other current assets and value-added tax assets

   

(28)

   

19

Changes in accounts payable and other current liabilities

   

27

   

54

Changes in income taxes payable

   

25

   

25

Changes in non-current operating lease liabilities

   

(206)

   

(193)

Other, net

   

(21)

   

(36)

Net Cash Provided by Operating Activities

   

843

   

924

Cash Flows – Investing Activities

           

Capital spending

   

(358)

   

(332)

Purchases of short-term investments, long-term bank deposits and notes

   

(1,479)

   

(2,172)

Maturities of short-term investments, long-term bank deposits and notes

   

1,702

   

1,904

Other, net

   

3

   

2

Net Cash Used in Investing Activities

   

(132)

   

(598)

Cash Flows – Financing Activities

           

Proceeds from short-term borrowings

   

307

   

Repayment of short-term borrowings

   

(52)

   

Repurchase of shares of common stock

   

(869)

   

(122)

Cash dividends paid on common stock

   

(126)

   

(108)

Dividends paid to noncontrolling interests

   

(28)

   

(28)

Contributions from noncontrolling interests

   

   

35

Payment of acquisition related holdback 

   

   

(3)

Other, net

   

(17)

   

(4)

Net Cash Used in Financing Activities

   

(785)

   

(230)

Effect of Exchange Rates on Cash, Cash Equivalents and Restricted Cash

   

(11)

   

(37)

Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash

   

(85)

   

59

Cash, Cash Equivalents, and Restricted Cash - Beginning of Period

   

1,128

   

1,130

Cash, Cash Equivalents, and Restricted Cash - End of Period

   

$                     1,043

   

$                     1,189

In this press release:

  • Certain performance metrics and non-GAAP measures are presented excluding the impact of foreign currency translation ("F/X"). These amounts are derived by translating current year results at prior year average exchange rates. We believe the elimination of the F/X impact provides better year-to-year comparability without the distortion of foreign currency fluctuations.
  • System sales growth reflects the results of all restaurants regardless of ownership, including Company-owned and franchise restaurants that operate our restaurant concepts, except for non-Company-owned restaurants for which we do not receive a sales-based royalty. Sales of franchise restaurants typically generate ongoing franchise fees for the Company at an average rate of approximately 6% of system sales. Franchise restaurant sales are not included in Company sales in the Condensed Consolidated Statements of Income; however, the franchise fees are included in the Company's revenues. We believe system sales growth is useful to investors as a significant indicator of the overall strength of our business as it incorporates all of our revenue drivers, Company and franchise same-store sales as well as net unit growth.
  • Effective January 1, 2018, the Company revised its definition of same-store sales growth to represent the estimated percentage change in sales of food of all restaurants in the Company system that have been open prior to the first day of our prior fiscal year, excluding the period during which stores are temporarily closed. We refer to these as our "base" stores. Previously, same-store sales growth represented the estimated percentage change in sales of all restaurants in the Company system that have been open for one year or more, including stores temporarily closed, and the base stores changed on a rolling basis from month to month. This revision was made to align with how management measures performance internally and focuses on trends of a more stable base of stores.

Unit Count by Brand

   
                             

KFC

     

12/31/2023

 

New Builds

 

Closures

 

Acquired

 

6/30/2024

     

Company-owned

   

9,237

 

614

 

(112)

 

1

 

9,740

     

Franchisees

   

1,059

 

144

 

(11)

 

(1)

 

1,191

     

Total

   

10,296

 

758

 

(123)

 

 

10,931

     
                             
                             

Pizza Hut

     

12/31/2023

 

New Builds

 

Closures

 

6/30/2024

         

Company-owned

   

3,155

 

246

 

(60)

 

3,341

         

Franchisees

   

157

 

10

 

(4)

 

163

         

Total