Yum China: Reports Fourth Quarter and FY 2023 Results

Shanghai / CN. (yb) Yum China Holdings Inc. reported unaudited results for the fourth quarter and year ended December 31, 2023. «This was a pivotal year for us,» says Chief Executive Joey Wat.

Fourth Quarter Highlights

  • Total system sales grew 21 percent year over year excluding foreign currency translation (“F/X”). Growth was mainly attributable to 12 percent net new unit contribution, 4 percent same-store sales growth and lapping temporary closures from the pandemic in the prior year.
  • Opened 542 net new stores in the fourth quarter. Total stores reached 14,644 as of December 31, 2023. KFC reached 10,296 stores and Pizza Hut reached 3,312 stores.
  • Total revenues increased 19 percent to USD 2.49 billion, or 21 percent excluding F/X.
  • Operating profit grew 170 percent to USD 110 million. Core operating profit grew 324 percent.
  • Restaurant margin expanded to 10.7 percent. Excluding items affecting comparability at the restaurant level – the impact from temporary relief and VAT deduction benefits in both years, restaurant margin expanded 170 basis points.
  • Diluted EPS increased 77 percent to USD 0.23. Excluding Special Items as well as unfavorable impacts of USD 0.01 from F/X and USD 0.04 from the mark-to-market investment in Meituan, the increase was 164 percent.
  • Foreign currency translation unfavorably impacted total revenues by USD 36 million, operating profit by USD 2 million and diluted EPS by USD 0.01.

Full Year Highlights

  • Total system sales grew 21 percent excluding F/X. Growth was mainly attributable to 9 percent net new unit contribution, 7 percent same-store sales growth and lapping temporary closures from the pandemic in the prior year.
  • Store count increased 13 percent, or 1,697 net new stores, exceeding the full-year net new store target.
  • Total revenues were up 15 percent to USD 10.98 billion, or 21 percent excluding F/X.
  • Operating profit grew 76 percent to USD 1.1 billion. Core operating profit grew 79 percent.
  • Restaurant margin expanded to 16.3 percent. Excluding items affecting comparability at the restaurant level, restaurant margin expanded 270 basis points.
  • Diluted EPS increased 89 percent to USD 1.97. Excluding Special Items as well as unfavorable impacts of USD 0.11 from F/X and USD 0.04 from the mark-to-market investment in Meituan, the increase was 101 percent.
  • Foreign currency translation unfavorably impacted total revenues by USD 589 million, operating profit by USD 61 million and diluted EPS by USD 0.11.
  • Shareholder returns through share repurchases and cash dividends increased 25 percent to USD 833 million.
  • Digital sales exceeded USD 9.2 billion, with digital ordering accounted for approximately 89 percent of total company sales.
  • Total membership of KFC and Pizza Hut exceeded 470 million, up 14 percent versus the prior year. Member sales accounted for approximately 65 percent of KFC and Pizza Hut’s system sales in the aggregate.

CEO Comments

Joey Wat, CEO of Yum China: «2023 was a pivotal year for Yum China. Not only did we demonstrate strong resilience during the pandemic, but we also seized opportunities that arose from China’s reopening. In 2023, our system sales grew by 21 percent, surpassing the industry’s growth rate, and we set new records for both revenue and profits. Our return to shareholders through cash dividends and share repurchases in 2023 was the highest since spinoff. Looking ahead, we remain very positive about the vast growth opportunities in China. Currently serving just one-third of China’s population, our ambitious goal is to extend our reach to half of the population by 2026. Over half of our new stores are located in lower-tier cities, strategically positioned to capture the demand from long-term consumption upgrades there. We are also expanding our addressable market and capturing incremental sales across city tiers with innovative products, engaging campaigns and a wider range of price points. Leveraging our distinctive strengths, including brands deeply ingrained in China, remarkable agility and robust operational execution, we are well-positioned to achieve our growth targets for 2024-2026 and deliver excellent returns to our shareholders through increased cash dividends and stepped-up share buybacks.»

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