Yum China Reports Fourth Quarter Results and Increases Dividend by 50%

Fourth Quarter Operating Profit Grew 36% and OP Margin¹ Expanded 140 Basis Points
Sequential Improvement in Same-Store Sales Index and Eighth Consecutive Quarter of Same-Store Transaction Growth
Full Year Operating Profit Rose 5% to $1.2 Billion, Core Operating Profit² Up 12% and Diluted EPS Up 18%
Record 2024 Results: Total Revenues of $11 Billion, 1,751 Net New Stores and $1.5 Billion Capital Returned to Shareholders

SHANGHAI, Feb. 6, 2025 /PRNewswire/ -- Yum China Holdings, Inc. (the "Company" or "Yum China") (NYSE: YUMC and HKEX: 9987) today reported unaudited results for the fourth quarter and year ended December 31, 2024.

Fourth Quarter Highlights

• Total system sales grew 4% year over year ("YoY"), excluding foreign currency translation ("F/X"). The growth was primarily attributable to 5% of net new unit contribution.³
• Same-store sales reached 99% of the prior year's level and improved sequentially from 97% in the third quarter. Same-store transactions grew 4% YoY, the eighth consecutive quarter of growth.
• Total revenues increased 4% YoY to $2.6 billion, a record-high for the fourth quarter (a 4% increase excluding F/X).
• The Company opened 534 net new stores and reached 16,395 stores as of December 31, 2024.
• Operating profit grew 36% YoY to $151 million. Core operating profit grew 35% YoY.
• OP margin was 5.8%, an increase of 140 basis points YoY, supported by restaurant margin expansion.
• Restaurant margin was 12.3%, an increase of 160 basis points YoY. Excluding $6 million in items affecting comparability, restaurant margin increased 180 basis points YoY, driven primarily by improved operational efficiencies.
• Diluted EPS increased 30% YoY to $0.30, or up 27% YoY excluding F/X. Excluding the impact of $0.01 from F/X and the mark-to-market equity investments in the fourth quarters of 2024 and 2023, Diluted EPS increased 20% YoY.

Full Year Highlights

• Total system sales grew 5% year over year, excluding F/X. The growth was primarily attributable to 7% of net new unit contribution. Same-store sales reached 97% of the prior year's level for the year.
• Total revenues increased 3% YoY to $11.3 billion, a record level since the spin-off. Excluding F/X, total revenues would have been $200 million higher, or a 5% increase YoY.
• Store count increased 12%, or 1,751 net new stores, with 512 net new stores, or 29% opened by franchisees.
• Delivery sales grew 14% YoY, maintaining the double-digit annual growth Yum China has sustained over the past decade. Delivery contributed approximately 39% of KFC and Pizza Hut's Company sales.
• Operating profit grew 5% YoY to $1.2 billion. Core operating profit grew 12% YoY.
• OP margin was 10.3%, up 20 basis points YoY, supported by resilient restaurant margins and savings in G&A expenses.
• Restaurant margin was 15.7%. Excluding $60 million in items affecting comparability, restaurant margin was flat YoY.
• Diluted EPS increased 18% YoY to $2.33, a record-high for the year, or up 22% YoY excluding F/X. Excluding the impact of $0.11 from F/X and the mark-to-market equity investments, Diluted EPS increased 12% YoY.
• Returned $1.5 billion to shareholders in 2024 through $248 million in cash dividends and $1.24 billion in share repurchases, representing approximately 8% of outstanding shares as of December 31, 2023.
• Digital sales⁴ reached $9.6 billion, with digital ordering accounting for approximately 90% of total Company sales.
• Total membership of KFC and Pizza Hut exceeded 525 million, up 11% versus the prior year. Member sales accounted for approximately 65% of KFC and Pizza Hut's system sales in aggregate.

Joey Wat, CEO of Yum China, commented, "We closed the year with a strong fourth quarter, propelling us to a number of record highs in 2024. In the fourth quarter, our system sales growth surpassed the restaurant industry's growth rate. Our same-store sales index improved sequentially to 99% of prior year levels, driven by the eighth consecutive quarter of same-store transaction growth. OP margin expanded by 140 basis points, and restaurant margin increased by 160 basis points, both on a year-over-year basis. We have steadily improved our metrics since the second quarter, with improvement in same-store sales index, margins, and operating profit growth each quarter. These results demonstrate the resilience of our business and the effectiveness of our strategy in improving sales and profitability amid challenging market conditions."

Wat continued, "Our dual focus on operational efficiency and innovation yielded excellent results, laying a solid foundation for future growth. Our Project Fresh Eye and Project Red Eye initiatives have given us new perspectives on our operations and transformed our organization. They have made us more efficient, agile and competitive across our restaurants, shared service centers and supply chains. Our innovative measures—from menu evolution to the introduction of breakthrough business models like KCOFFEE Cafes and Pizza Hut WOW—have expanded our addressable market and increased our market share. KFC has demonstrated considerable resilience and growth momentum. Pizza Hut has made significant progress in transforming itself to become more affordable for customers and more profitable for the Company."

Wat concluded, "Looking ahead, we remain excited about the significant growth opportunities in China. With tailored store models, we are expanding through both Company-owned stores and franchise stores and are on track to achieve our goal of 20,000 stores by 2026. Franchisees enable us to expand into remote areas, lower-tier cities and strategic locations previously beyond our reach. We are also increasing our cash dividend by a considerable 50% and continuing our share repurchases, positioning us to return a total of $4.5 billion to shareholders between 2024 and 2026. The average annual amount is equivalent to 9% of our current market capitalization. Leveraging our unique strengths, we are confident the steps we are taking will help create sustainable long-term value for our shareholders."

Capital Returns to Shareholders

• The Company is on track to return a total of $4.5 billion to shareholders between 2024 and 2026.

o  The Company returned $1.5 billion in capital to shareholders for the full year and $248 million in the fourth quarter.

o  For the full year, Yum China repurchased 31.3 million shares of common stock, which is equivalent to approximately 8% of its outstanding shares as of December 31, 2023.

o  As of December 31, 2024, approximately $1.3 billion remained available for future share repurchases under the current authorization program.

• The Company plans to return a total of $3 billion to shareholders from the beginning of 2025 through the end of 2026.

o  The Board declared a 50% increase in the cash dividend, raising it to $0.24 per share on Yum China's common stock, payable on March 27, 2025, to shareholders of record as of the close of business on March 6, 2025.

o  The Company has entered into share repurchase agreements in the U.S. and Hong Kong for an aggregate repurchase amount of approximately US$360 million through open market transactions for the first half of 2025. The share repurchase agreements include approximately US$290 million under Rule 10b5-1 of the U.S. Securities Exchange Act of 1934 in the U.S. and approximately HK$550 million for a similar program in Hong Kong.

Fourth Quarter:

• System sales for KFC grew 5% YoY. Same-store sales reached 99% of the prior year's level, improved from 98% in the third quarter. Same-store transactions grew 3% YoY, the eighth consecutive quarter of growth.
• Delivery sales grew 16% YoY, contributing approximately 42% of KFC's Company sales.
• Operating profit increased 15% and Core operating profit increased 18% YoY.
• OP margin was 9.9%, an increase of 100 basis points YoY.
• Restaurant margin was 13.3%. Excluding items affecting comparability at the restaurant level, restaurant margin expanded 160 basis points YoY, primarily due to favorable commodity prices and higher operational efficiency, partially offset by the impact of increased value-for-money offerings and wage inflation.

Full Year:

• System sales for KFC grew 6% YoY. Same-store sales reached 98% of the prior year's level.
• Delivery sales grew 16%, contributing approximately 40% of KFC's Company sales.
• KFC opened a record 1,352 net new stores in 2024, with 402 net new stores opened by franchisees, accounting for 30%. Total store count reached 11,648 stores at year-end 2024, of which 13% are operated by franchisees.
• Operating profit was $1.2 billion, a 1% decrease YoY. Core operating profit increased 6%.
• OP margin was 14.0%.
• Restaurant margin was 16.9%. Excluding items affecting comparability at the restaurant level, restaurant margin decreased by 20 basis points, primarily due to increased value-for-money offerings to drive traffic and wage inflation, partially offset by favorable commodity prices and improved operational efficiency.

Fourth Quarter:

• System sales for Pizza Hut grew 3% YoY. Same-store sales reached 98% of the prior year's level, improved from 94% in the third quarter. Same-store transactions grew 9% YoY, the eighth consecutive quarter of growth and the highest quarter of growth in 2024.
• Delivery sales grew 6% YoY, contributing approximately 42% of Pizza Hut's Company sales.
• Operating profit grew 156% and core operating profit increased 226% YoY.
• OP margin was 2.6%, an increase of 160 basis points YoY.
• Restaurant margin was 9.3%. Excluding items affecting comparability at the restaurant level, restaurant margin expanded 220 basis points YoY, primarily due to higher operational efficiency and favorable commodity prices, partially offset by the impact of increased value-for-money offerings to drive traffic and wage inflation.

Full Year:

• System sales for Pizza Hut grew 2% YoY. Same-store sales finished at 95% of the prior year's level.
• Delivery sales grew 7% YoY, contributing approximately 39% of Pizza Hut's Company sales.
• Pizza Hut opened a record 412 net new stores in 2024, with 42 net new stores opened by franchisees, accounting for 10%. Total store count reached 3,724 stores at year-end 2024, of which 5% are operated by franchisees.
• Operating profit was $153 million, representing 7% growth. Core operating profit increased 19% YoY.
• OP margin was 6.8%, an increase of 50 basis points YoY.
• Restaurant margin was 12.0%. Excluding items affecting comparability at the restaurant level, restaurant margin expanded 60 basis points, primarily due to higher operational efficiency and favorable commodity prices, partially offset by the impact of increased value-for-money offerings to drive traffic and wage inflation.

Outlook

• The Company targets approximately 1,600 to 1,800 net new stores and capital expenditures in the range of approximately $700 million to $800 million for the 2025 fiscal year.
• The Company plans to return $3 billion to shareholders in 2025 through 2026, adding to the $1.5 billion it delivered to shareholders in 2024.
• The Company anticipates the franchise mix of net new stores will gradually increase to 40-50% for KFC and 20-30% for Pizza Hut over the next few years.

Other Updates

• Yum China was ranked No. 1 globally for the Restaurant & Leisure Facilities Industry in the S&P Global 2024 Corporate Sustainability Assessment. Yum China was included in both the Dow Jones Sustainability Indices: World Index and Emerging Market Index for the fifth consecutive year.
• Yum China was once again named by Top Employers Institute as a Top Employer in China for the seventh consecutive year. The Company ranked second nationwide for the first time and retained its position as the top-ranked employer in the restaurant industry for the fourth consecutive year. These achievements highlight Yum China's unwavering commitment to fostering an outstanding workplace and employee experience.

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 7:00 a.m. U.S. Eastern Time on Thursday, February 6, 2025 (8:00 p.m. Beijing/Hong Kong Time on Thursday, February 6, 2025).

A live webcast of the call may be accessed at https://edge.media-server.com/mmc/p/v2wgc5an.

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 and a unique access PIN.

Pre-registration Link: https://register.vevent.com/register/BI475e24b0874041078f0918c1c1fc901a 

A replay of the webcast will be available two hours after the event and will remain accessible until February 5, 2026. Additionally, earnings release accompanying slides will be available at the Company's Investor Relations website http://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 http://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, franchise mix of net new stores, 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. Our plan of capital returns to shareholders is based on current expectations, which may change based on market conditions, capital needs or otherwise. 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 operates over 16,000 restaurants under six brands across over 2,200 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 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 http://ir.yumchina.com.

Contacts

In this press release:

• Certain performance metrics and non-GAAP measures are presented excluding the impact of foreign currency translation ("F/X"). These amounts are derived by translating current year results at prior year average exchange rates. We believe the elimination of the F/X impact provides better year-to-year comparability without the distortion of foreign currency fluctuations.
• System sales growth reflects the results of all restaurants regardless of ownership, including Company-owned and franchise restaurants that operate our restaurant concepts, except for non-Company-owned restaurants for which we do not receive a sales-based royalty. Sales of franchise restaurants typically generate ongoing franchise fees for the Company at an average rate of approximately 6% of system sales. Franchise restaurant sales are not included in Company sales in the Condensed Consolidated Statements of Income; however, the franchise fees are included in the Company's revenues. We believe system sales growth is useful to investors as a significant indicator of the overall strength of our business as it incorporates all of our revenue drivers, Company and franchise same-store sales as well as net unit growth.
• Effective January 1, 2018, the Company revised its definition of same-store sales growth to represent the estimated percentage change in sales of food of all restaurants in the Company system that have been open prior to the first day of our prior fiscal year, excluding the period during which stores are temporarily closed. We refer to these as our "base" stores. Previously, same-store sales growth represented the estimated percentage change in sales of all restaurants in the Company system that have been open for one year or more, including stores temporarily closed, and the base stores changed on a rolling basis from month to month. This revision was made to align with how management measures performance internally and focuses on trends of a more stable base of stores.

Reconciliation of Reported GAAP Results to Non-GAAP Measures
(in millions, except per share data)
(unaudited)

In addition to the results provided in accordance with U.S. Generally Accepted Accounting Principles ("GAAP") in this press release, the Company provides the following non-GAAP measures:

• Measures adjusted for Special Items, which include Adjusted Operating Profit, Adjusted Net Income, Adjusted Earnings Per Common Share ("EPS"), Adjusted Effective Tax Rate and Adjusted EBITDA;
• Company Restaurant Profit ("Restaurant profit") and Restaurant margin;
• Core Operating Profit and Core OP margin, which exclude Special Items, and further adjusted for Items Affecting Comparability and the impact of F/X;

These non-GAAP measures are not intended to replace the presentation of our financial results in accordance with GAAP.  Rather, the Company believes that the presentation of these non-GAAP measures provides additional information to investors to facilitate the comparison of past and present results, excluding those items that the Company does not believe are indicative of our core operations.

With respect to non-GAAP measures adjusted for Special Items, the Company excludes impact from Special Items for the purpose of evaluating performance internally and uses them as factors in determining compensation for certain employees. Special Items are not included in any of our segment results.

Adjusted EBITDA is defined as net income including noncontrolling interests adjusted for equity in net earnings (losses) from equity method investments, income tax, interest income, net, investment gain or loss, depreciation and amortization, store impairment charges, and Special Items. Store impairment charges included as an adjustment item in Adjusted EBITDA primarily resulted from our semi-annual impairment evaluation of long-lived assets of individual restaurants, and additional impairment evaluation whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. If these restaurant-level assets were not impaired, depreciation of the assets would have been recorded and included in EBITDA. Therefore, store impairment charges were a non-cash item similar to depreciation and amortization of our long-lived assets of restaurants. The Company believes that investors and analysts may find it useful in measuring operating performance without regard to such non-cash items.

Restaurant Profit is defined as Company sales less expenses incurred directly by our Company-owned restaurants in generating Company sales, including cost of food and paper, restaurant-level payroll and employee benefits, rent, depreciation and amortization of restaurant-level assets, advertising expenses, and other operating expenses. Company restaurant margin percentage is defined as Restaurant profit divided by Company sales. We also use Restaurant profit and Restaurant margin for the purposes of internally evaluating the performance of our Company-owned restaurants and we believe they provide useful information to investors as to the profitability of our Company-owned restaurants.

Core Operating Profit is defined as Operating Profit adjusted for Special Items, and further excluding Items Affecting Comparability and the impact of F/X. We consider quantitative and qualitative factors in assessing whether to adjust for the impact of items that may be significant or that could affect an understanding of our ongoing financial and business performance or trends. Items such as charges, gains and accounting changes which are viewed by management as significantly impacting the current period or the comparable period, due to changes in policy or other external factors, or non-cash items pertaining to underlying activities that are different from or unrelated to our core operations, are generally considered "Items Affecting Comparability." Examples of Items Affecting Comparability include, but are not limited to: temporary relief from landlords and government agencies; VAT deductions due to tax policy changes; and amortization of reacquired franchise rights recognized upon acquisitions. We believe presenting Core Operating Profit provides additional information to further enhance comparability of our operating results and we use this measure for purposes of evaluating the performance of our core operations. Core OP margin is defined as Core Operating Profit divided by Total revenues, excluding the impact of F/X.

The following tables set forth the reconciliation of the most directly comparable GAAP financial measures to the non-GAAP financial measures. The reconciliation of GAAP Operating Profit to Restaurant Profit and Core Operating Profit by segment is presented in Segment Results within this release.

Reconciliation of GAAP Operating Profit to Restaurant Profit is as follows:

Reconciliation of GAAP Operating Profit to Core Operating Profit is as follows:

Reconciliation of GAAP Operating Profit to Restaurant Profit is as follows:

Reconciliation of GAAP Operating Profit to Core Operating Profit is as follows:

Reconciliation of GAAP Operating Profit to Restaurant Profit is as follows:

Reconciliation of GAAP Operating Profit to Core Operating Profit is as follows:

Reconciliation of GAAP Operating Profit to Restaurant Profit is as follows:

Reconciliation of GAAP Operating Profit to Core Operating Profit is as follows:

The above tables reconcile segment information, which is based on management responsibility, with our Condensed Consolidated Statements of Income. 

(1) Amounts have not been allocated to any segment for purpose of making operating decision or assessing financial performance as the transactions are deemed corporate revenues and expenses in nature.

(2) Primarily includes revenues and associated expenses of transactions with franchisees derived from the Company's central procurement model whereby the Company centrally purchases substantially all food and paper products from suppliers and then sells and delivers to KFC and Pizza Hut restaurants, including franchisees.

SOURCE Yum China Holdings, Inc.