SHANGHAI, China – Yum China Holdings, Inc. today reported unaudited results for the fourth quarter and year ended December 31, 2023. Joey Wat, CEO of Yum China, commented, “2023 was a pivotal year for Yum China. Not only did we demonstrate strong resilience during the pandemic, but we also seized opportunities that arose from China’s reopening. In 2023, our system sales grew by 21%, surpassing the industry’s growth rate, and we set new records for both revenue and profits.
Our return to shareholders through cash dividends and share repurchases in 2023 was the highest since spinoff.
Looking ahead, we remain very positive about the vast growth opportunities in China. Currently serving just one-third of China’s population, our ambitious goal is to extend our reach to half of the population by 2026.
Fourth Quarter Highlights
- Total system sales grew 21% year over year excluding foreign currency translation (“F/X”). Growth was mainly attributable to 12% net new unit contribution(2), 4% same-store sales growth and lapping temporary closures from the pandemic in the prior year.
- Opened 542 net new stores in the fourth quarter. Total stores reached 14,644 as of December 31, 2023. KFC reached 10,296 stores and Pizza Hut reached 3,312 stores.
- Total revenues increased 19% to $2.49 billion, or 21% excluding F/X.
- Operating profit grew 170% to $110 million. Core operating profit grew 324%.
- Restaurant margin expanded to 10.7%. Excluding items affecting comparability at the restaurant level – the impact from temporary relief and VAT deduction benefits in both years, restaurant margin expanded 170 basis points.
- Diluted EPS increased 77% to $0.23. Excluding Special Items as well as unfavorable impacts of $0.01 from F/X and $0.04 from the mark-to-market investment in Meituan, the increase was 164%.
- Foreign currency translation unfavorably impacted total revenues by $36 million, operating profit by $2 million and diluted EPS by $0.01.
Yum China: Full Year Highlights
- Total system sales grew 21% excluding F/X. Growth was mainly attributable to 9% net new unit contribution, 7% same-store sales growth and lapping temporary closures from the pandemic in the prior year.
- Store count increased 13%, or 1,697 net new stores, exceeding the full-year net new store target.
- Total revenues were up 15% to $10.98 billion, or 21% excluding F/X.
- Operating profit grew 76% to $1.1 billion. Core operating profit grew 79%.
- Restaurant margin expanded to 16.3%. Excluding items affecting comparability at the restaurant level, restaurant margin expanded 270 basis points.
- Diluted EPS increased 89% to $1.97. Excluding Special Items as well as unfavorable impacts of $0.11 from F/X and $0.04 from the mark-to-market investment in Meituan, the increase was 101%.
- Foreign currency translation unfavorably impacted total revenues by $589 million, operating profit by $61 million and diluted EPS by $0.11.
- Shareholder returns through share repurchases and cash dividends increased 25% to $833 million.
- Digital sales(3) exceeded $9.2 billion, with digital ordering accounted for approximately 89% of total company sales.
- Total membership of KFC and Pizza Hut exceeded 470 million, up 14% versus the prior year. Member sales accounted for approximately 65% of KFC and Pizza Hut’s system sales in the aggregate.
(1) Core Operating Profit is defined as Operating Profit adjusted for Special Items, further excluding items affecting comparability and the impact of F/X. The Company uses Core Operating Profit for the purposes of evaluating the performance of its core operations. Please refer to “Reconciliation of Reported GAAP Results to Non-GAAP Measures” included in the accompanying tables of this release for further details.
(2) Net new unit contribution refers to sales contribution from net new stores.
(3) Digital sales refer to sales at company-owned stores where orderings were placed digitally.
Increasing dividends and stepping up share repurchases
- Yum China returned approximately $390 million to shareholders in the fourth quarter and $833 million for the full year through share repurchases and cash dividends. This stands as the highest full year return thus far in the Company’s history.
- During the fourth quarter, the Company stepped up share repurchases, totaling 7.5 million shares of common stock for $336 million. In 2023 the Company repurchased 12.4 million shares, equivalent to about 3% of its total outstanding shares. As of December 31, 2023, approximately $1.5 billion remained available for future share repurchases under the current authorization program.
- The Company plans to significantly accelerate the return of value to its shareholders in 2024:
– The board declared a 23% increase in cash dividend to $0.16 per share on Yum China’s common stock, payable on March 26, 2024 to shareholders of record as of the close of business on March 5, 2024.
– The Company plans to repurchase $1.25 billion of its common stock in 2024, through open market transactions in the U.S. and Hong Kong. This includes two primary components: (i) an aggregate repurchase amount of $750 million in 2024 under the Rule 10b5-1 of the United States Securities Exchange Act of 1934 (the “Exchange Act”) in the U.S. and a similar program in Hong Kong; and (ii) an aggregate repurchase amount of $500 million in the first quarter of 2024 under the Rule 10b-18 of the Exchange Act in the U.S. and through similar transactions in Hong Kong.
