SHANGHAI, China – Yum China Holdings, Inc. today reported unaudited results for the first quarter ended March 31, 2021. Yum China reported substantial year-over-year growth in the first quarter, as the Company began to lap prior year periods that were impacted by COVID-19. System sales growth was mainly attributable to same-store sales growth, new unit contribution and substantially fewer temporary store closures. Operating Profit growth was further driven by lower commodity prices and productivity gains.
First quarter sales were impacted by regional resurgences of COVID-19 before the Chinese New Year and tightened public health measures across China. The tightened measures and associated consumer caution resulted in smaller gatherings and a noticeably reduced volume of travel.
Our transportation and tourist locations, representing high single digits of our store mix, were significantly affected by the decline in travel. According to government statistics, the number of travelers was down approximately 40% versus 2020, and down approximately 70% versus 2019, when compared to the corresponding 40-day Chinese New Year holiday periods. These impacts were more pronounced for KFC, which accounts for most of our stores in these locations.
The pandemic has also introduced volatility and uncertainty to our operations. The Company acted and reacted nimbly to changing conditions. By planning for a wide range of possible situations, our team worked tirelessly to meet shifting demand across city tiers, trade zones and sales channels. Leveraging our digital capabilities, direct connection with consumers and in-house supply chain, we were able to deftly adjust offers and promotions to changing market conditions. We deployed resources flexibly to help ensure the best possible levels of restaurant staffing and delivery riders, as demand patterns shifted.
Looking ahead, the Company expects a full recovery of same-store sales to pre-COVID-19 levels to take time, and the unevenness of recovery to linger for several reasons. Public health measures and social distancing behaviors persist as occasional outbreaks, such as those in the first quarter and more recent outbreaks in Yunnan province, remind people of the lingering risks. Dine-in traffic, as well as sales at our transportation locations, remains well below 2019 levels. Accordingly, the Company will continue to focus on driving the sales recovery while ensuring the safety of our employees and customers.
Yum China Holdings, First Quarter Highlights
- Total revenues increased 46% year over year to $2.56 billion from $1.75 billion (a 36% increase excluding foreign currency translation (“F/X”)).
- Total system sales increased 34% year over year, with increases of 24% at KFC and 57% at Pizza Hut, excluding F/X.
- Same-store sales increased 10% year over year, with increases of 5% at KFC and 38% at Pizza Hut, excluding F/X.
- Opened 315 new stores during the quarter; total store count reached 10,725 as of March 31, 2021.
- Restaurant margin was 18.7%, compared with 10.7% in the prior year period.
- Operating Profit increased 250% year over year to $342 million from $97 million (a 227% increase excluding F/X).
- Adjusted Operating Profit increased 249% year over year to $345 million from $98 million (a 227% increase excluding F/X).
- Effective tax rate was 29.6%.
- Net Income increased 272% to $230 million from $62 million in the prior year period, primarily due to the increase in Operating Profit.
- Adjusted Net Income increased 271% to $233 million from $63 million in the prior year period (a 249% increase excluding the mark-to-market losses of $16 million and $8 million in the first quarter of 2021 and 2020, respectively, from our equity investments; a 225% increase if further excluding F/X).
- Diluted EPS increased 231% to $0.53 from $0.16 in the prior year period.
- Adjusted Diluted EPS increased 238% to $0.54 from $0.16 in the prior year period (a 217% increase excluding the mark-to-market losses from our equity investments in the first quarter of 2021 and 2020; a 194% increase if further excluding F/X).
- Results include the consolidation of Huang Ji Huang since April 2020, and Suzhou KFC since August 2020.
Dividends
The Board of Directors declared a cash dividend of $0.12 per share on Yum China’s common stock, payable as of the close of business on June 18, 2021 to shareholders of record as of the close of business on May 25, 2021.
