Yum China: Reports Third Quarter 2021 Results

Shanghai / CN. (yb) Yum China Holdings Inc. reported unaudited results for the third quarter ended September 30, 2021.

Impact of Covid-19 Outbreak and Mitigation Efforts

As we described in the business update released in September, third quarter results were significantly impacted by the Delta variant outbreak that started in late July. This regional outbreak was the most widely spread wave since the first quarter of 2020. Several major cities were locked down, including Nanjing and Yangzhou, which are key cities for us in eastern China. Zhengzhou and Wuhan, the capital cities of Henan and Hubei provinces, respectively, were also significantly affected. In mid-September, there were also smaller regional outbreaks in Fujian and Heilongjiang provinces, in southeastern and northeastern China, respectively. Strict public health measures were implemented across the country, including the closure of many tourist locations. These actions led to fewer social activities, substantially lower travel volume, and cancelled holiday trips. According to government statistics, the restaurant industry in China was considerably impacted in August with a revenue decline of approximately 10 percent compared to August 2019. Despite a mild recovery, the restaurant industry’s revenue growth of approximately 2 percent in September compared to 2019 was the slowest since March 2021.

Going into the fourth quarter, strict public health measures remain in effect nationwide. The effects of Covid-19 persist, such as fewer social activities, cautious consumer spending and subdued travel volume. According to government statistics, for the seven-day National Day holiday that started on October 1, the number of travellers was down 2 percent compared to the same period last year and down 30 percent versus the corresponding period in 2019. Related travel spending was down 5 percent compared to 2020 and 40 percent compared to 2019. With latest regional outbreaks resurging across 12 provinces and rigorous preventative health measures in force across the country, we continue to expect same-store sales recovery to take time. Same-store sales are gradually recovering but remain below the prior year and pre-Covid 2019 levels, since overall dine-in volume as well as traffic at transportation hubs are still significantly impacted. We are focused on driving sales by leveraging our member base and digital channels, launching great food for both dine-in and home consumption and enhancing our hybrid delivery model.

Third Quarter Highlights

  • Total revenues increased 9 percent year over year to USD 2.55 billion from USD 2.35 billion (a 2 percent increase excluding foreign currency translation (F/X)).
  • Total system sales increased 1 percent year over year, with increases of 1 percent at both KFC and Pizza Hut, excluding F/X.
  • Same-store sales decreased 7 percent year over year, with decreases of 8 percent at KFC and 5 percent at Pizza Hut, excluding F/X.
  • Opened 524 new stores during the quarter.
  • Total store count reached 11,415 as of September 30, 2021, an increase of 1,265 stores over the past year.
  • Restaurant margin was 12.2 percent, compared with 18.6 percent in the prior year period, primarily due to sales deleveraging.
  • Operating Profit decreased 68 percent year over year to USD 178 million from USD 556 million (a 70 percent decrease excluding F/X), primarily due to sales deleveraging and lapping the non-cash gain of USD 239 million from the re-measurement of our previously held equity interest in Suzhou KFC in the third quarter 2020.
  • Adjusted Operating Profit decreased 48 percent year over year to USD 168 million from USD 320 million (a 52 percent decrease excluding F/X).
  • Effective tax rate was 28.3 percent.
  • Net Income decreased 76 percent to USD 104 million from USD 439 million in the prior year period, primarily due to the decrease in Operating Profit and loss from our mark-to-market investment in Meituan.
  • Adjusted Net Income decreased 63 percent to USD 96 million from USD 263 million in the prior year period (a 45 percent decrease excluding the net loss of USD 32 million in the third quarter of 2021 and the net gain of USD 29 million in the third quarter of 2020, respectively, from our mark-to-market equity investment in Meituan; a 50 percent decrease if further excluding F/X).
  • Diluted EPS decreased 78 percent to USD 0.24 from USD 1.10 in the prior year period.
  • Adjusted Diluted EPS decreased 67 percent to USD 0.22 from USD 0.66 in the prior year period (a 50 percent decrease excluding the net loss in the third quarter of 2021 and the net gain in the third quarter of 2020, respectively, from our mark-to-market investment; a 53 percent decrease 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 (130 KB):

20211028-YUM-CHINA-Q3-2021
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