Shanghai / CN. (yb) Yum! China Holdings (Yum! Brands Inc.) reported unaudited results for the third quarter ended August 31, 2017. Highlights:
- Same-store sales grew 6 percent, including growth of 7 percent at KFC, flat at Pizza Hut.
- Total system sales grew 10 percent, including growth of 11 percent at KFC and 7 percent at Pizza Hut, excluding foreign currency translation (F/X).
- Opened 129 new restaurants during the quarter.
- Total restaurant margin increased 0.8 percentage points to 20.0 percent, primarily driven by same-store sales leverage.
- Operating profit increased 11 percent, and 13 percent excluding F/X, primarily driven by same-store sales growth. F/X negatively impacted reported operating profit by USD 5 million.
- Basic EPS increased 4 percent to USD 0.55 and diluted EPS was flat at USD 0.53.
- Effective tax rate was 31.7 percent, compared to 29.8 percent in the prior-year quarter, primarily due to higher costs of repatriating current year earnings into the U.S.
- Net income increased 9 percent to USD 211 million.
- Adjusted Ebitda increased 9 percent to USD 425 million.
CEO Comments
«We are pleased to report the third consecutive quarter of delivering positive same-store sales growth. With revenues exceeding USD 2 billion in the quarter, restaurant margin, operating profit and net income have all improved. We opened 129 new restaurants in the third quarter and we are on track to achieve our development target of 550-600 new stores in the year», said Micky Pant, CEO of Yum China.
«In this quarter, our strategic initiatives on digital and delivery continued to show encouraging development, which we believe will enable our long-term growth. The connection with our over 120 million loyalty members is getting stronger. The growth in mobile payments and cashless settlement methods for sales continued to outperform previous quarters. With over 5’100 restaurants across China offering delivery service, delivery contributed over 14 percent of company sales in the third quarter.
Given the strength of our business and our confidence in generating strong cash flows long term, our Board of Directors has approved a regular quarterly cash dividend program and authorized additional share repurchases. These demonstrate our strong commitment to increase shareholder returns through disciplined capital allocation while simultaneously driving strong operating performance.
With our strong operating results in this third quarter and our commitment to return capital to shareholders, we believe we are well positioned to continue to increase shareholder value over the long run».
New-Unit Development and Asset Upgrade
- Opened 129 new restaurants during the third quarter, and 352 year to date.
- Remodeled 200 restaurants during the third quarter, and 429 year to date, led by KFC.
Restaurant Margin
- For the third quarter, restaurant margin for Yum China increased 0.8 percentage points to 20.0 percent, primarily driven by same-store sales leverage and labor efficiency, partially offset by wage inflation and promotion costs.
- Year to date, restaurant margin for Yum China increased 2.3 percentage points to 19.3 percent, primarily due to the impact of retail tax structure reform, and also driven by same-store sales leverage, partially offset by wage inflation and commodity inflation.
Digital and Delivery
- Driven by our digital initiatives, we continued to strengthen our loyalty membership programs. By the end of the third quarter, total members in our loyalty programs surpassed 120 million, including 97 million members for KFC and 30 million for Pizza Hut.
- Mobile payments exceeded 45 percent of company sales in the third quarter of 2017. Over USD 1.2 billion in company sales were settled by cashless payment methods during the quarter.
- Over 5’100 restaurants across China offered delivery services as of the end of the third quarter. Delivery contributed over 14 percent of company sales in the third quarter.
Share Repurchase Update
- For the year to date ended August 31, 2017, we repurchased approximately 3.4 million shares for USD 128 million at an average price of USD 38.18 per share.
- In October 2017, the Board of Directors increased Yum China’s existing share repurchase authorization from USD 300 million to an aggregate of USD 550 million.
Dividend
- The Board of Directors has approved a regular quarterly cash dividend program, and declared an initial cash dividend of USD 0.10 per share on Yum China’s common stock, payable as of the close of business on December 21, 2017 to stockholders of record as of the close of business on November 30, 2017. Future dividends will be subject to review and approval by the Board of Directors.
