SHANGHAI, China — Yum China Holdings, Inc. yesterday reported unaudited results for the third quarter ended September 30, 2023. Total revenues increased 9% year over year to $2.91 billion from $2.68 billion (a 15% increase in constant currency). Total system sales increased 15% year over year, with increases of 15% at KFC and 13% at Pizza Hut in constant currency.
Growth was mainly attributable to new unit contribution, same-store sales and lapping of temporary closures in the prior year.
Yum China ‘s same-store sales increased 4% year over year, with increases of 4% at KFC and 2% at Pizza Hut in constant currency.
The company opened 500 net new stores during the quarter; total store count reached 14,102, as of September 30, 2023.
Operating Profit increased 2% year over year to $323 million from $316 million (a 9% increase in constant currency), primarily driven by sales leveraging.
Adjusted Operating Profit increased 3% year over year to $327 million from $318 million (a 10% increase in constant currency).
Restaurant margin was 17.0%, compared with 18.8% in the prior year period, mainly due to lapping of austerity measures and temporary relief in the prior year.
Effective tax rate was 27.5%.
Net Income increased 18% to $244 million from $206 million in the prior year period, primarily due to the increase in Operating Profit and higher interest income.
Adjusted Net Income increased 19% to $248 million from $208 million in the prior year period (a 27% increase in constant currency). Adjusted Net Income includes the net losses of $3 million and $12 million in the third quarter of 2023 and 2022, respectively, from the mark-to-market equity investment in Meituan. Excluding such losses, Adjusted Net Income increased 14% year over year (a 21% increase in constant currency).
Diluted EPS increased 18% to $0.58 from $0.49 in the prior year period.
Adjusted Diluted EPS increased 20% to $0.59 from $0.49 in the prior year period (a 29% increase in constant currency). Excluding the net losses from the mark-to-market equity investments in the third quarter of 2023 and 2022, as aforementioned, Adjusted Diluted EPS increased 15% year over year (a 21% increase in constant currency).
Joey Wat, CEO of Yum China, commented, “We delivered a record third quarter in total revenues, adjusted operating profit and net new store openings. System sales grew 15% and adjusted operating profit excluding temporary reliefs grew 21% in constant currency.
For the first nine months of the year, operating profit and adjusted operating profit also set new records, reaching around $1 billion. Our robust supply chain, industry-leading digital ecosystem and strong innovation capabilities have enabled us to stay agile in evolving market conditions.
We continued to enrich our core menu offerings and launch targeted, engaging campaigns to drive incremental traffic. Beef burger and whole chicken categories combined make up more than 6% of KFC’s sales mix, exceeding that of the Original Recipe Chicken. KFC’s collaboration with Honkai: Star Rail, a popular e-game, broadened our customer reach and grew our membership base.
Furthermore, we are expanding our price range to appeal to a broader customer base, tapping into underserved consumers. At Pizza Hut, we continue to expand pizza selections priced below RMB 50, to capture this very significant segment of the overall pizza market. At KFC, our offers range from premium products such as Ultra Cheese 2.0 Beef Burger to RMB 19.9 3-item value combos to address diverse customer preferences.”
