#China #Shanghai #Pizza Hut #Yum China #KFC

Yum China's First Quarter Highlights

Yum China Holdings, Inc., a leading name in the quick-service and casual dining restaurant sector, has reported its first quarter results for the fiscal year. The report highlights a resilient performance despite ongoing market uncertainties. Here are the major takeaways from the quarter ending March 31, 2025.

Strong Sales Growth

The company witnessed a total system sales increase of 2% year-over-year, driven primarily by new store openings, which contributed a net addition of 4%. It is interesting to note that this growth comes even with the impact of one less business day due to 2024 being a leap year. For the first time since the first quarter of 2024, same-store sales reached 100% of the previous year’s level, indicating a strong rebound in customer spending patterns. Notably, transactions at stores advanced by 6% year-over-year, marking the ninth consecutive quarter of growth in this area.

Revenue and Profit Margins

Yum China reported total revenues of $3.0 billion, reflecting a 1% year-on-year growth (2% when excluding foreign currency exchange effects). The operating profit grew to $399 million, which is a 7% increase from the same period last year. The operating profit margin also saw a positive shift, increasing to 13.4%, up by 80 basis points from the previous year. This improvement is attributed to cost containment in areas such as food and paper expenses as well as effective operational strategies. The restaurant margin also expanded to 18.6%, indicating enhanced profitability across operations.

In terms of earnings per share (EPS), diluted EPS increased by 8%, reaching $0.77, marked as a record high for the first quarter. When foreign exchange impacts are discounted, EPS growth stood at an impressive 12%.

Digital Initiatives and Membership Growth

Yum China continues to enhance its digital sales framework, serving as a significant growth driver. The company reported digital sales reaching $2.6 billion, with online ordering accounting for approximately 93% of total company sales. Furthermore, customer loyalty programs have seen success, with total membership for KFC and Pizza Hut exceeding 540 million, marking a 12% increase compared to the prior year.

Expansion and Future Goals

During the quarter, Yum China opened 247 net new stores, including 62 by franchisees. By March 31, 2025, the total store count reached 16,642, comprising 11,943 KFC and 3,769 Pizza Hut locations. CEO, Joey Wat, reaffirmed the company’s target to open between 1,600 to 1,800 net new stores throughout the year, alongside capital expenditures estimated between $700 and $800 million.

The company's commitment to return $3 billion to shareholders in 2025 through dividends and share repurchases underscores its confidence in maintaining a robust financial health amid economic fluctuations. With $262 million returned to shareholders via repurchase and dividends in the first quarter alone, Yum China aims to sustain this trajectory moving forward.

Innovations and Recommendations

In line with its focus on innovation, Yum China has implemented several new product initiatives. For example, KFC has launched a spicy flavor of its Original Recipe Chicken while Pizza Hut has added unique twists to its classic dishes, broadening its appeal. These efforts designed to attract more customers indicate a proactive approach to capturing market share in a competitive environment.

As the landscape of the food service industry continues to evolve, Yum China’s combination of expansion, operational efficiency, and robust digital strategies position it well for future growth. With a strong foothold in the Chinese market and a focus on innovation, the company remains a compelling player to watch in the months ahead.