System Sales Up 6%, Diluted EPS Up 4%, or 10% Excluding F/X
Operating Profit Reaches $374 million with Core Operating Profit¹ Growing to $396 million
Total Stores Have Surpassed Milestone of 15,000 with Record First Quarter Openings of 378 Net New Stores 
Record Quarterly Cash Return to Shareholders of $745 million

SHANGHAI, April 30, 2024 /PRNewswire/ -- Yum China Holdings, Inc. (the "Company" or "Yum China") (NYSE: YUMC and HKEX: 9987) today reported unaudited results for the first quarter ended March 31, 2024.

 First Quarter Highlights

• Total system sales grew 6% year over year ("YoY") excluding foreign currency translation ("F/X"), primarily attributable to 8% net new unit contribution.²
• Total store count reached 15,022 as of March 31, 2024, including 10,603 KFC stores and 3,425 Pizza Hut stores. The Company opened 378 net new stores in the quarter, a record for the first quarter.
• Total revenues increased 1% YoY to $2.96 billion. Excluding F/X, total revenues would have been $154 million higher, or 7% increase YoY.
• Same-store sales reached 97% of the prior year's level, against strong performance in the same period last year.
• Operating profit was $374 million. Excluding F/X, operating profit would have been $22 million higher. Core operating profit grew 1% YoY to $396 million.
• Operating profit as a percentage of total revenues ("OP Margin") was 12.6%. Savings in G&A partially offset the lower Restaurant margin, which was 17.6% in the quarter.
• Diluted EPS increased 4% YoY to $0.71, up 10% YoY excluding F/X.
• Delivery sales grew 12% YoY and contributed approximately 38% of KFC and Pizza Hut's Company sales. Digital sales³ reached $2.5 billion, with digital ordering accounted for approximately 89% of total Company sales.
• Total membership of KFC and Pizza Hut reached 485 million. Member sales accounted for approximately 65% of KFC and Pizza Hut's system sales in aggregate.
• Yum China returned approximately $745 million to shareholders in the first quarter through share repurchases and cash dividends, the highest quarterly return in the Company's history.

CEO Comments 

Joey Wat, CEO of Yum China, commented, "We achieved solid sales growth in the first quarter with total revenues hitting an all-time high. Our core operating profit grew modestly from last year's high base and EPS was up double digits excluding foreign currency. Meanwhile, we are marching forward with our expansion initiatives in a disciplined manner, bringing our total store count to a milestone of 15,000 stores. Besides investing in our organic growth, we boosted capital returns to shareholders to a new record level. Remaining agile, we are continuously learning and innovating to embrace new consumer trends in changing market conditions. Our amazing high-ticket products, such as our KFC beef burger and whole chicken, grew by double digits in the quarter. Our six-year old iconic Crazy Thursday campaign and limited-time-offer of all-you-can-eat at Pizza Hut continue to excite customers and drive incremental traffic. By optimizing delivery strategies, KFC expanded its market share on the aggregator platforms and drove double-digit growth in delivery sales. At the same time, our relentless pursuit of greater operational efficiency from store to supply chain further fortifies our resilience. This has empowered us to pass on savings to our customers and other stakeholders." 

Wat continued, "Operating under a near-term challenging environment, we will remain laser-focused on understanding and capturing the evolving needs of consumers to continually connect with them. Looking toward the future, we are absolutely confident in seizing China's vast opportunities. We are expanding addressable market through a multifaceted approach with flexible store formats, strategic franchising and a range of exciting products across price points. With these actions underway, we believe we are well-poised to sustain strong growth and create long-term value for our shareholders."

• System sales for KFC grew 7% YoY for the quarter, primarily driven by net new unit contribution of 8%.
• KFC opened 307 net new stores during the quarter, more than double the net new stores opened in the prior year period. This includes 58 net new stores opened by franchisees.
• Operating profit was $372 million and Core operating profit was $392 million for the quarter.
• Restaurant margin was 19.3% for the quarter. Excluding Items Affecting Comparability at the restaurant level, restaurant margin decreased 190 basis points versus strong comparison a year ago, primarily due to increased value-for-money offerings to drive traffic and wage inflation, partially offset by favorable commodity prices.
• Delivery sales grew 14% and contributed approximately 39% of KFC's Company sales for the quarter. Off-premise dining accounted for approximately 68% of KFC's Company sales.

• System sales for Pizza Hut grew 4% YoY for the quarter, primarily driven by net new unit contribution of 8%.
• Pizza Hut opened 113 net new stores during the quarter, a 40% increase from the 80 net new stores opened in the first quarter of the prior year.
• Operating profit was $47 million and Core operating profit was $50 million for the quarter. 
• Restaurant margin for the quarter was 12.5%. Excluding Items Affecting Comparability at the restaurant level, restaurant margin decreased 100 basis points versus strong comparison a year ago, primarily due to increased value-for-money offerings to drive traffic and wage inflation, partially offset by operational efficiency improvement and savings in advertising expenses.
• Delivery sales grew 5% and contributed approximately 37% of Pizza Hut's Company sales for the quarter. Off-premise dining accounted for approximately 47% of Pizza Hut's Company sales.

Accelerated Shareholder Returns

• Yum China stepped up share repurchases in the quarter totaling 16.6 million shares of common stock for approximately $681 million. As of March 31, 2024, approximately $853 million remained available for future share repurchases under the current authorization program.
• Yum China's board of directors declared a cash dividend of $0.16 per share on Yum China's common stock, payable on June 18, 2024 to shareholders of record as of the close of business on May 28, 2024.

Outlook

The Company's targets for 2024 fiscal year remain unchanged from the prior period's disclosures.

• Open approximately 1,500 to 1,700 net new stores.
• Make capital expenditures in the range of approximately $700 million to $850 million.
• Return a Company record-setting $1.5 billion to shareholders through quarterly cash dividends and share repurchases.

Note on Non-GAAP Measures

Reported GAAP results include items that are excluded from non-GAAP measures. See "Reconciliation of Reported GAAP Results to Non-GAAP Measures" and "Segment Results" within this release for non-GAAP reconciliation details. 

Conference Call

Yum China's management will hold an earnings conference call at 8:00 p.m. U.S. Eastern Time on Monday, April 29, 2024 (8:00 a.m. Beijing/Hong Kong Time on Tuesday, April 30, 2024).

A live webcast of the call may be accessed https://edge.media-server.com/mmc/p/29a7ndj.

To join by phone, please register in advance of the conference through the link provided below. Upon registering, you will be provided with participant dial-in numbers, a passcode and a unique access PIN.

Pre-registration link:           https://s1.c-conf.com/diamondpass/10037794-hf876t.html

A replay of the conference call will be available one hour after the call ends until Tuesday, May 7, 2024 and may be accessed by phone using the following numbers:

Additionally, this earnings release, the accompanying slides, as well as the live and archived webcast of this conference call will be available at Yum China's Investor Relations website at https://ir.yumchina.com. 

For important news and information regarding Yum China, including our filings with the U.S. Securities and Exchange Commission and the Hong Kong Stock Exchange, visit Yum China's Investor Relations website at https://ir.yumchina.com. Yum China uses this website as a primary channel for disclosing key information to its investors, some of which may contain material and previously non-public information.

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including under "2024 Outlook." We intend all forward-looking statements to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the fact that they do not relate strictly to historical or current facts and by the use of forward-looking words such as "expect," "expectation," "believe," "anticipate," "may," "could," "intend," "belief," "plan," "estimate," "target," "predict," "project," "likely," "will," "continue," "should," "forecast," "outlook," "commit" or similar terminology. These statements are based on current estimates and assumptions made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we believe are appropriate and reasonable under the circumstances, but there can be no assurance that such estimates and assumptions will prove to be correct. Forward-looking statements include, without limitation, statements regarding the future strategies, growth, business plans, investments, store openings, capital expenditures, dividend and share repurchase plans, CAGR for system sales, operating profit and EPS, earnings, performance and returns of Yum China, anticipated effects of population and macroeconomic trends, pace of recovery of Yum China's business, the anticipated effects of our innovation, digital and delivery capabilities and investments on growth and beliefs regarding the long-term drivers of Yum China's business. Forward-looking statements are not guarantees of performance and are inherently subject to known and unknown risks and uncertainties that are difficult to predict and could cause our actual results or events to differ materially from those indicated by those statements. We cannot assure you that any of our expectations, estimates or assumptions will be achieved. The forward-looking statements included in this press release are only made as of the date of this press release, and we disclaim any obligation to publicly update any forward-looking statement to reflect subsequent events or circumstances, except as required by law. Numerous factors could cause our actual results or events to differ materially from those expressed or implied by forward-looking statements, including, without limitation: whether we are able to achieve development goals at the times and in the amounts currently anticipated, if at all, the success of our marketing campaigns and product innovation, our ability to maintain food safety and quality control systems, changes in public health conditions, our ability to control costs and expenses, including tax costs, as well as changes in political, economic and regulatory conditions in China, and those set forth under the caption "Risk Factors" in our Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q). In addition, other risks and uncertainties not presently known to us or that we currently believe to be immaterial could affect the accuracy of any such forward-looking statements. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. You should consult our filings with the Securities and Exchange Commission (including the information set forth under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q) for additional detail about factors that could affect our financial and other results.

About Yum China Holdings, Inc.

Yum China is the largest restaurant company in China with a mission to make every life taste beautiful. The Company has over 400,000 employees and operates over 15,000 restaurants under six brands across more than 2,000 cities in China. KFC and Pizza Hut are the leading brands in the quick-service and casual dining restaurant spaces in China, respectively. In addition, Yum China has also partnered with Lavazza to develop the Lavazza coffee concept in China. Little Sheep and Huang Ji Huang specialize in Chinese cuisine. Taco Bell offers innovative Mexican-inspired food. Yum China has a world-class, digitalized supply chain which includes an extensive network of logistics centers nationwide and an in-house supply chain management system. Its strong digital capabilities and loyalty program enable the Company to reach customers faster and serve them better. Yum China is a Fortune 500 company with the vision to be the world's most innovative pioneer in the restaurant industry. For more information, please visit https://ir.yumchina.com.

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