Shanghai / CN. (yb) Yum China Holdings Inc. reported unaudited results for Q2/2021 ended June 30.
Impact of Covid-19 Outbreak and Mitigation Efforts
Second quarter operations improved from a year ago. System sales and operating profit grew year over year. System sales growth was led by accelerated new store openings and same-store sales growth. Operating profit growth was further driven by lower commodity prices, and productivity improvements.
The Covid-19 pandemic continued to impact the Company’s operations and results in the second quarter. Same-store sales recovery to pre-Covid levels was interrupted by the Delta variant outbreak in southern China, which started in late May. Local authorities tightened preventive health measures and social distancing requirements. Many communities were locked down. At the peak of this outbreak, approximately 400 of our restaurants were either temporarily closed or provided delivery and takeaway services only. This represents nearly 30 percent of our restaurants in Guangdong province, which has two of the four tier one cities in China, is the largest economy in China and one of Yum China’s largest markets. Across China, cautious consumer behavior persists as sporadic outbreaks remind consumers of the lingering risks. Same-store dine-in volume is still well below 2019 levels while off-premise occasions continue to grow rapidly. Overall, the pace of recovery varied by region with eastern and western China recovering relatively faster.
Traffic at our transportation and tourist locations improved from the first quarter but remained well below pre-Covid levels. According to government statistics, tourism spending for the three holidays in the second quarter was still down 20 percent to 40 percent compared to 2019. The impact was more pronounced for KFC, with its higher mix of stores in transportation and tourist locations.
As we entered July, traffic and sales continue to be pressured by lingering effects of Covid-19, such as reduced travel, a shortened school holiday and regional outbreaks in Yunnan. The latest outbreak in Nanjing, the capital city of Jiangsu province, is still evolving. The Company continues to expect that a full recovery of same-store sales will take time, with the recovery path impacted by regional resurgences and the corresponding public health measures. We will continue to focus on the elements of the business under our control, such as food innovation, compelling value propositions, a focus on customer experience, and operating efficiency, to drive sales and protect margins.
Second Quarter Highlights
- Total revenues increased 29 percent year over year to USD 2.45 billion from USD 1.90 billion [a 17 percent increase excluding foreign currency translation (F/X)].
- Total system sales increased 14 percent year over year, with increases of 14 percent at KFC and 16 percent at Pizza Hut, excluding F/X.
- Same-store sales increased 5 percent year over year, with increases of 4 percent at KFC and 11 percent at Pizza Hut, excluding F/X.
- Opened 404 new stores during the quarter.
- Total store count reached 11,023 as of June 30, 2021, an increase of 1,069 stores over the past year.
- Restaurant margin was 15.8 percent, compared with 13.7 percent in the prior year period.
- Operating Profit increased 83 percent year over year to USD 233 million from USD 128 million (a 65 percent increase excluding F/X).
- Adjusted Operating Profit increased 80 percent year over year to USD 237 million from USD 132 million (a 63 percent increase excluding F/X).
- Effective tax rate was 24.8 percent.
- Net Income increased 37 percent to USD 181 million from USD 132 million in the prior year period, primarily due to the increase in Operating Profit.
- Adjusted Net Income increased 36 percent to USD 185 million from USD 136 million in the prior year period (a 72 percent increase excluding the net gains of USD 5 million and USD 31 million in the second quarter of 2021 and 2020, respectively, from our mark-to-market equity investments; a 55 percent increase if further excluding F/X).
- Diluted EPS increased 24 percent to USD 0.42 from USD 0.34 in the prior year period.
- Adjusted Diluted EPS increased 20 percent to USD 0.42 from USD 0.35 in the prior year period (a 52 percent increase excluding the net gains from our mark-to-market equity investments in the second quarter of 2021 and 2020; a 37 percent increase if further excluding F/X).
- Results include the consolidation of Huang Ji Huang since April 2020, and Suzhou KFC since August 2020.
For additional information please read the company’s PDF file below (139 KB):20210729-YUM-CHINA-Q2-2021