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Yum China Holdings, Inc. Reports Second Quarter 2022 Financial Results

Strategic Insights

— 2 min read

Yum China Holdings, Inc. is the largest restaurant company in China in terms of system sales, with over 12,000 restaurants covering over 1,700 cities primarily in China as of June 30, 2022. Despite facing significant challenges due to the ongoing COVID-19 pandemic, the company reported a decline in company sales for the quarter, driven by same-store sales decline and substantially more temporary store closures. However, the company's focus on increasing its geographic footprint and expanding its brand portfolio, including the acquisition of a 28% equity interest in Hangzhou Catering Service Group, has positioned it for future growth.

Key Takeaways:

  • As of June 30, 2022, the company operated over 12,000 units, predominantly KFC and Pizza Hut restaurants, making it the largest restaurant company in China in terms of system sales.
  • The COVID-19 pandemic continued to significantly affect the company's operations in the second quarter, with over 2,500 stores in China being temporarily closed or offering only takeaway and delivery services during April and May.
  • Same-store sales in April and May decreased by more than 20% year over year, but improved sequentially to a decline of approximately high single digits year over year in June.
  • Company sales for the year to date ended June 30, 2022 remained flat both including and excluding the impact of foreign exchange.
  • The company completed the acquisition of a 28% equity interest in Hangzhou Catering Service Group, increasing its equity interest to approximately 60% directly and indirectly, and allowing the company to consolidate Hangzhou KFC.
  • The company has committed to expanding the Taco Bell store network to at least 100 stores by the end of 2022 and at least 225 stores by the end of 2025, with certain investment support from Yum.
  • The company has a 65% equity interest in the joint venture with Lavazza Group to explore and develop the Lavazza coffee shop concept in China.

Statistics:

  • As of June 30, 2022, the company operated over 12,000 units, predominantly KFC and Pizza Hut restaurants.
  • Over 2,500 stores in China were temporarily closed or offering only takeaway and delivery services during April and May.
  • Same-store sales in April and May decreased by more than 20% year over year.
  • Sales performance improved sequentially to a decline of approximately high single digits year over year in June.
  • Company sales for the year to date ended June 30, 2022 remained flat both including and excluding the impact of foreign exchange.
  • The company has a 28% equity interest in Hangzhou Catering Service Group.
  • The company has committed to expanding the Taco Bell store network to at least 100 stores by the end of 2022 and at least 225 stores by the end of 2025.

Sources:

  • Yum China Holdings, Inc. (2022) Management's Discussion and Analysis of Financial Condition and Results of Operations, Item 2.
  • Yum China Holdings, Inc. (2022) Condensed Consolidated Financial Statements.
  • COMTEX (2022) Yum China Holdings, Inc. Reports Second Quarter 2022 Financial Results.

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