Yum China Holdings, Inc. · NYSE:YUMC
Yum China — Q4 2023 Earnings Presentation
46 slides from Yum China's earnings presentation, Feb 6, 2024
Slide 1: Fourth Quarter and Fiscal Year 2023 Results
Fourth Quarter and Fiscal Year 2023 Results 7 February 2024 NYSE: YUMC and HKEX: 9987
Slide 2: Cautionary Statement
Cautionary Statement This presentation 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. We intend all forward-looking statements to be covered by the safe harbor provisions of the Private Sec
Slide 3: Strong Growth Drives Full-Year Record Revenues, Adjusted Operating Profit and Net New Store Openings
Strong Growth Drives Full-Year Record Revenues, Adjusted Operating Profit and Net New Store Openings Strong Growth Year-over-Year System Sales Growth Operating Profit Growth - FY Net New Stores +21% +76% +79% 1,697 Full year OP Core OP1 Full year Total Revenues Operating Profit & Total Stores Adjust
Slide 4: Strong Growth Drives Q4 Record Revenues, Adjusted Operating Profit and Net New Store Openings
Strong Growth Drives Full-Year Record Revenues, Adjusted Operating Profit and Net New Store Openings Strong Growth Year-over-Year System Sales Growth Operating Profit Growth – Q4 Net New Stores +21% +170% +324% 542 Q4 OP Core OP1 Q4 Total Revenues Operating Profit & Total Stores Adjusted Operating P
Slide 5: Our People Made it Possible
Our People Made it Possible 5
Slide 6: Net New Stores Drove 9% Sales Growth in 2023
Net New Stores Drove 9% Sales Growth in 2023 +21% Sales +9% Contribution +7% Sales Full System Net New Unit Same-store Year Growth 1 Growth 2023 Total stores 1,697 net new stores in 2023 14,644 12,947 Accelerated Store Opening Strategy Rationale 11,788 10,506 Tremendous white space Tracking ~1,000 c
Slide 7: KFC and Pizza Hut Maintained Healthy New Store Payback
KFC and Pizza Hut Maintained Healthy New Store Payback Expanding Across City Tiers Reduced Capex Healthy Return 2023 Net New Stores Total Stores Average Capex New Store Payback3 #1 Western QSR brand in China1 per New Store 2 10,296 ~2 years Total Stores 54 46 % 56 44 % ~1.5 mn % % RMB 1,202 Net New
Slide 8: Driving Sales Growth Along Entire Continuum from Extensions to Disruptive Innovations
Driving Sales Growth Along Entire Continuum from Extensions to Disruptive Innovations +21% Sales +9% Contribution +7% Sales Full System Net New Unit Same-store Year Growth 1 Growth 2023 Expand Boundary of Fundamentals Incubate Disruptive Innovations 1.7bn Total Transactions • Strengthen Core • Expan
Slide 9: Innovating Delicious Food at Scale - "$100mn Club"
Innovating Delicious Food at Scale - “$100mn Club” Joined the Club Launched or included in permanent menu from 2014 to 2022 in 2023! $250mn+ $250mn+ ~$200mn Beef Burger Single-Bone Chicken Juicy Whole Chicken $100mn+ Chicken Breast Burger ~$150mn ~$250mn Durian Pizza KCOFFEE Note: Based on 2023 sale
Slide 10: Capturing More Traffic with Affordable Price Points and Engaging Campaigns
Capturing More Traffic with Affordable Price Points and Engaging Campaigns Entry-price Burgers Entry-price Pizzas Abundant Value Awesome Toys Chinese burger combo at Get 2 pizzas, pasta or rice at RMB 49 Family bucket at RMB 59 Christmas Pokemon campaign RMB 20.9 (RMB 39/49 regular price) 10
Slide 11: Driving Online Traffic; Engaging Members to Improve Loyalty
Driving Online Traffic; Engaging Members to Improve Loyalty Grow Digital Sales Grow Members Drive Online Traffic Digital sales ($bn) Digital order 1 Members (mn) 2 Member sales 3 65% 89% 89% 63% 62% 86% 60% 80% 9.2 52% 470+ Mini 8.1 410+ program 7.7 360+ 55% 300+ Super APP 5.9 240+ 4.3 Local service
Slide 12: Improved Restaurant Margin YoY and vs 2019
Improved Restaurant Margin YoY and vs 2019 Full Year 2023 Restaurant Margin 16.3% +220bp YoY 16.0% +270bp YoY excluding items affecting comparability 14.9% Restaurant Level 14.1% Cost of Sales 31.0% 10bp better YoY 13.7% Cost of Labor 26.2% Even Occupancy & Others 26.5% 210 bp better YoY 2019 2020 2
Slide 13: Stepping Up Returns to Shareholders
Stepping Up Returns to Shareholders Returns to Shareholders1 $mn 1,500 $3bn $3bn+ Returned since Target to return spin-off in 2024-262 833 Quarterly Cash Dividends +23% 668 473 $0.10 $0.12 $0.13 $0.16 442 Q4 2017 Q4 2018 Q1 2023 Q1 2024 278 166 102 Share Repurchases Plan in 2024 In the U.S. & 2017 2
Slide 14: 2024: Targeting Double Digits Unit Growth
2024: Targeting Double Digits Unit Growth Net new stores 1,500- CapEx $mn 1,697 1,700 To step up investment in digital, supply chain and other 1,306 1,282 infrastructure 1,159 Huang Ji 700- Huang 850 716 689 679 710 657 501 ex HJH 470 421 415 435 419 2017 2018 2019 2020 2021 2022 2023 2024 E 2017 20
Slide 15: 2024-2026 Growth Targets Remain Unchanged
2024-2026 Growth Targets Remain Unchanged 20,000 Stores by 2026 3-Year Growth Targets (CAGR) on 2023 Base1 High Single to High Single to Double Digits Double Digits Double Digits System Sales Operating Profit EPS ~$3bn Targeted return of cash to shareholders 2 1 In constant currency 2 Based on curre
Slide 16: By Brand
By Brand 16
Slide 17: KFC Delivered Solid Growth
KFC Delivered Solid Growth Full year 2023 +20% +200bps +53% +50% System sales Restaurant margin Operating Core operating growth YoY profit growth profit growth1 Photo: KFC store in Wuxi Liyuan Economic Development Zone (无锡蠡园开发区) 1 Excludes the impact of special items, items affecting comparability a
Slide 18: 100 Million+ Beef Burgers Sold in 2023
100 Million+ Beef Burgers Sold in 2023 +18% increase YoY Units sold 105mn 2019 2021 2023 From budget Innovative choices to combinations premium Wagyu and co-branding Beef burger with golden Creamy lasagna beef burger & Angus beef campaigns cheese sauce 18
Slide 19: 50 Million+ Whole Chickens Sold in 2023
50 Million+ Whole Chickens Sold in 2023 +89% increase YoY Secured supplies at scale to meet demand and lower costs Units sold 51mn Improved packaging for better customer experience Innovated new flavor to satisfy different tastes Original and Sichuan-style 2021 2022 2023 spicy whole chicken 19
Slide 20: 190 Million+ Cups of KCOFFEE Sold in 2023
190 Million+ Cups of KCOFFEE Sold in 2023 +35% YoY increase in cups sold Innovative products Affordable price points Improving access with flexible formats Sandalwood latte Standalone coffee shop & coffee truck 20
Slide 21: Pizza Hut Fully Revitalized
Pizza Hut Fully Revitalized Full year 2023 +20% +260bps +102% +198% System sales Restaurant margin Operating Core operating growth YoY profit growth profit growth1 Photo: Pizza Hut store in Shanghai Daning International Commercial Plaza (上海大宁国际) 1 Excludes the impact of special items, items affectin
Slide 22: Over 140 Million Pizzas Sold in 2023
Over 140 Million Pizzas Sold in 2023 – Bountiful Pizza Choices Across Price Ranges +34% YoY increase Units sold 142mn Wide range of pizza toppings: Potato wedges & bacon, Popcorn chicken, Texas 2021 2022 2023 barbecue chicken, New Orleans chicken, Wagyu beef super supreme 22
Slide 23: Photo: Lavazza store in Guangzhou ICC
Photo: Lavazza store in Guangzhou ICC (广州环贸) 23
Slide 24: Lavazza Doubled Sales and Improved Store Economics in 2023
Lavazza Doubled Sales and 122 Improved Store Economics in 2023 Total stores1 Full year 2023 Dual 2x +17% Menu Innovation Growth engines – Sales YoY Same-store Coffee shop + Retail sales growth Authentic Improving Italian Store Digital Coffee Economics Excellence Experience 20% CapEx 4mn members redu
Slide 25: Photos: Taco Bell store in Hangzhou
Photos: Taco Bell store in Hangzhou Xiaoshan District D+Park (杭州萧山朝龙汇店) 25
Slide 26: Taco Bell Has Made Notable Progress
Taco Bell Has Made Notable Progress 120 Total stores1 +62% 4mn Sales growth in 2023 Members 2024 Focus: Food Innovation Store Model Refinement Durian & chicken taco Fried chicken taco 1 As of December 31, 2023 26
Slide 27: Photos: Little Sheep store in Inner Mongolia
Photos: Little Sheep store in Inner Mongolia province, Baotou Gangtie Street (内蒙古包头钢铁大街店) 27
Slide 28: Little Sheep Turned Profitable in 2023 and is Ready to Expand
Little Sheep Turned Profitable in 2023 163 and is Ready to Expand Total stores1 Turned profitable in 2023 To expand store portfolio Hot pot dipping sauce in 2024 To grow packaged food sales in 2024 Build lamb expertise Pre-packed lamb soup 1 As of December 31, 2023 28
Slide 29: Photo: Huang Ji Huang store in Hunan province
Photo: Huang Ji Huang store in Hunan province, Changde, Dingcheng District Wuyue Plaza (湖南常德鼎城吾悦) 29
Slide 30: Huang Ji Huang Remained Resilient and Expanded in 2023
Huang Ji Huang Remained Resilient 631 and Expanded in 2023 Total stores2 Menu Innovation +40 27% ~3x Net new stores System sales Operating growth profit YoY1 Successful Rolled out franchisees digitalization recruitment supported enhanced franchisee store growth management Sirloin steak & Spicy pork
Slide 31: Appendix
YumChina Appendix
Slide 32: Exceptional Performance in 2023
Exceptional Performance in 2023 RMB to USD rate vs prior year Q4 FY Q4: ~1% depreciation FY: ~5% depreciation 2022 2023 2022 2023 FY 2023 Total stores 12,947 14,644 12,947 14,644 Net new stores 538 542 1,159 1,697 Record level Revenue ($bn) 2.09 2.49 9.57 10.98 Record level System sales growth1 (4)%
Slide 33: Robust Results in Fourth Quarter
Robust Results in Fourth Quarter 10.98 1,106 Total 9.57 Operating Revenue Profit 629 ($bn) 2.09 2.49 ($mn) 41 110 Q4 FY 2022 2023 Q4 FY Key factors for Q4 year-over-year increase Key factors for Q4 year-over-year increase + New unit contribution + Sales leveraging + Same-store sales growth + New uni
Slide 34: Fourth Quarter Key Performance Highlights – KFC & Pizza Hut
Fourth Quarter Key Performance Highlights – KFC & Pizza Hut Digital Same-store sales growth Channel Mix Members order Average Total off- Member SSSG Transactions Delivery Million Sales % ticket premise sales % KFC 3% +16% (11)% 38% 68% 440+ 65% 89% Pizza 6% +15% (8)% 40% 49% 155+ 63% 92% Hut 34
Slide 35: Substantial Growth in Operating Profit for Both KFC and Pizza Hut
Substantial Growth in Operating Profit for Both KFC and Pizza Hut Same-store System sales Restaurant Operating Core OP sales OP growth growth1 margin profit ($ mn)2 growth3 growth1 Q4 +20% +3% 12.0% 167 +43% +43% Full Year +20% +7% 17.7% 1,202 +53% +50% +200bp YoY In line with 2019 From loss From lo
Slide 36: Reconciliation of Reported Results to Non-GAAP Measures
Reconciliation of Reported Results to Non-GAAP Measures (in $mn) Quarter Ended Year Ended 12/31/2023 12/31/2022 12/31/2023 12/31/2022 Non-GAAP Reconciliations Reconciliation of Operating Profit to Adjusted Operating Profit Operating Profit $ 110 $ 41 $ 1,106 $ 629 Special Items, Operating Profit (6)
Slide 37: Reconciliation of Operating Profit to Core Operating Profit
Reconciliation of Operating Profit to Core Operating Profit* (in $mn) Yum China Quarter ended % Change Year ended % Change 12/31/2023 12/31/2022 B/(W) 12/31/2023 12/31/2022 B/(W) Reconciliation of Operating Profit to Core Operating Profit Operating profit $ 110 $ 41 170 $ 1,106 $ 629 76 Special Item
Slide 38: Reconciliation of Operating Profit to Core Operating Profit (KFC)
Reconciliation of Operating Profit to Core Operating Profit (in $mn) KFC Quarter Ended Year Ended 12/31/2023 12/31/2022 12/31/2023 12/31/2022 GAAP Operating Profit (Loss) $ 167 $ 117 $ 1,202 $ 787 Special Items, Operating Profit — — — — Adjusted Operating Profit $ 167 $ 117 $ 1,202 $ 787 Items Affec
Slide 39: Reconciliation of Operating Profit to Core Operating Profit (Pizza Hut)
Reconciliation of Operating Profit to Core Operating Profit (in $mn) Pizza Hut Quarter Ended Year Ended 12/31/2023 12/31/2022 12/31/2023 12/31/2022 GAAP Operating Profit (Loss) $ 5 $ (20) $ 142 $ 70 Special Items, Operating Profit — — — — Adjusted Operating Profit $ 5 $ (20) $ 142 $ 70 Items Affecti
Slide 40: Reconciliation of Operating Profit to Restaurant Profit
Reconciliation of Operating Profit to Restaurant Profit (in $mn) Yum China Quarter Ended Year Ended 12/31/2023 12/31/2022 12/31/2023 12/31/2022 GAAP Operating Profit (Loss) $ 110 $ 41 $ 1,106 $ 629 Less: Franchise fees and income 20 16 89 81 Revenues from transactions with franchisees(1) 90 68 372 2
Slide 41: Reconciliation of Operating Profit to Restaurant Profit (KFC)
Reconciliation of Operating Profit to Restaurant Profit (in $mn) KFC Quarter Ended Year Ended 12/31/2023 12/31/2022 12/31/2023 12/31/2022 GAAP Operating Profit (Loss) $ 167 $ 117 $ 1,202 $ 787 Less: Franchise fees and income 14 12 62 56 (1) 12 9 45 33 Revenues from transactions with franchisees Othe
Slide 42: Reconciliation of Operating Profit to Restaurant Profit (Pizza Hut)
Reconciliation of Operating Profit to Restaurant Profit (in $mn) Pizza Hut Quarter Ended Year Ended 12/31/2023 12/31/2022 12/31/2023 12/31/2022 GAAP Operating Profit (Loss) $ 5 $ (20) $ 142 $ 70 Less: Franchise fees and income 1 1 7 7 (1) 1 1 4 4 Revenues from transactions with franchisees Other rev
Slide 43: Items Affecting Comparability – 2023 by Quarter
Items Affecting Comparability – 2023 by Quarter (in $mn) Yum China 23Q1 23Q2 23Q3 23Q4 Items Affecting Comparability Temporary relief from landlords (8) (2) — (1) Temporary relief from government agencies (2) (1) (1) (3) VAT deductions (19) (9) (14) (2) Amortization of reacquired franchise rights 2
Slide 44: ESG Key Initiatives
ESG Key Initiatives Climate Action Circular Economy Nutrition & Food Safety People 2050 net-zero targets Baskets and serving trays Published Yum China People First: submitted to SBTi for containing recycled coffee Nutrition and Health Fair, Care & Pride validation ground rolled out in over Commitmen
Slide 45: ESG Ratings and Awards
ESG Ratings and Awards ESG Rating People & Community 4th Year Industry Best 6th Year Joined in August 2023 Industry highest score MSCI ESG ‘AA’ rating Industry best for the 3rd year To support UN SDG1 Industry Leader Leadership 5th Year 2nd Year Climate Supplier Engagement One of the only three comp
Slide 46: About Yum China
About Yum China Largest restaurant Fortune 500 6 restaurant company in China1 company brands 14,000+ 2,000+ 400,000+ restaurants cities in China employees Vision: To be the world’s most innovative pioneer in the restaurant industry World-class, Strong digital capabilities & Strategic Moat: digitaliz