Shanghai / CN. (yb) Yum China Holdings Inc. reported unaudited financial results for the third quarter ended September 30, 2020.
Impact of Covid-19 Outbreak and Mitigation Efforts
Third quarter operations improved, although still impacted by reduced traffic at transportation and tourist locations, the delayed and shortened school holiday and the other lingering effects of the Covid-19 outbreak. Dine-in volume has been recovering, while delivery and takeaway remained popular options. The Company’s primary focus continues to be safety, efficiency and driving traffic. We launched attractive digital and membership campaigns with strong value propositions to drive sales recovery.
Through proactive cost structure realignment and productivity improvements, the Company achieved restaurant margin and operating profit expansions compared to the prior year period. Labor productivity improved year over year, partially due to part-time worker shortages. We intend to increase staffing levels in the coming months to balance service and efficiency.
Third Quarter Highlights
- Completed our secondary listing on the main board of the Hong Kong Stock Exchange and global offering on September 10, 2020, with net proceeds of USD 2.2 billion.
- Completed the acquisition of an additional 25 percent equity interest in an unconsolidated affiliate that operates KFC stores in and around Suzhou, China («Suzhou KFC»), for cash consideration of USD 149 million, bringing Yum China’s equity interest in Suzhou KFC to 72 percent. In connection with the acquisition, a non-cash gain of USD 239 million was recorded from the re-measurement of our previously held equity interest in Suzhou KFC at fair value.
- Results include the consolidation of Huang Ji Huang since April 2020, and Suzhou KFC since August 2020.
- Total revenues increased 1 percent year over year to USD 2.35 billion from USD 2.32 billion (flat excluding F/X foreign currency translation).
- Total system sales increased 1 percent year over year, with declines of 1 percent at KFC and 6 percent at Pizza Hut, excluding F/X.
- Same-store sales declined 6 percent year over year, with a 6 percent decline at KFC and 7 percent decline at Pizza Hut, excluding F/X.
- Opened 312 new stores during the quarter; total store count reached 10,150 as of September 30, 2020.
- Restaurant margin was 18.6 percent, compared with 17.7 percent in the prior year period.
- Operating Profit increased 86 percent year over year to USD 556 million from USD 300 million (83 percent increase excluding F/X), primarily due to the re-measurement gain of Suzhou KFC acquisition.
- Adjusted Operating Profit increased 7 percent year over year to USD 320 million from USD 300 million (5 percent increase excluding F/X).
- Effective tax rate was 25.6 percent.
- Net Income increased 96 percent to USD 439 million from USD 223 million in the prior year period, primarily due to the increase in Operating Profit and gains from our equity investment in Meituan Dianping («Meituan»).
- Adjusted Net Income increased 17 percent to USD 263 million from USD 223 million in the prior year period (10 percent increase excluding the USD 29 million and USD 12 million net gains in the third quarter of 2020 and 2019, respectively, from our equity investment in Meituan; 8 percent increase if further excluding F/X).
- Diluted EPS increased 90 percent to USD 1.10 from USD 0.58 in the prior year period.
- Adjusted Diluted EPS increased 14 percent to USD 0.66 from USD 0.58 in the prior year period (5 percent increase excluding the gains from our equity investment in Meituan in 2020 and 2019; 4 percent increase if further excluding F/X).
For additional information please read the company’s PDF file below (215 KB):20201029-YUM-CHINA-Q3-2020