Yum China Holdings, Inc. · NYSE:YUMC
Yum China — Q2 2024 Earnings Presentation
35 slides from Yum China's earnings presentation, Aug 5, 2024
Slide 1: Second Quarter 2024 Results
Second Quarter 2024 Results 6 August 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: Record-Setting Second Quarter Performance Amidst Challenging Industry Dynamics
Record-Setting Second Quarter Performance1 Amidst Challenging Industry Dynamics Growing Sales and Profit on top of High Base Last Year System Sales Growth2 Solid OP Margin (OPM) at 9.9% Record Q2 OP $266mn YoY vs 2019 OPM YoY Core OPM YoY OP YoY Core OP YoY3 +4% +25% +20bps +70bps +4% +12% +7% ex F/
Slide 4: Opening New Stores to Capture Long-Term Opportunities
Opening New Stores to Capture Long-Term Opportunities Total Stores 15,423 <4 years Net new stores 401 in Q2 >10,000 779 in 1H 8 years >5,000 Net new unit contribution to sales 25 years 8% in Q21 1 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 24'1H 2000 2001 2002 2003 2004 2005 20
Slide 5: Maintaining Good New Store Returns
Maintaining Good New Store Returns Through Flexible Store Formats and Reduced Capex Penetrating into More Cities Reduced Healthy New Leveraging Franchisees Strategically Average Capex Store Payback3 #1 Western QSR in China1 Net New Total 24 1H 10,931 Total Stores Stores Stores 2,100+ ~1.5 mn ~2 year
Slide 6: Record Cash Return to Shareholders, Supported by Strong Cash Generation
Record Cash Return to Shareholders, Supported by Strong Cash Generation and Healthy Cash Position Cash Returns to Shareholders1 $mn ~$4bn $3bn+ $3.1bn FY Target 2 Returned since Target to return Net Cash3 by end ~1,500 spin-off in 2024-262 of June 2024 Quarterly Cash Dividends +23% 833 $0.10 $0.12 $
Slide 7: Double-Digit Delivery Sales Growth
Double-Digit Delivery Sales Growth Delivery Sales +11% YoY in 1H ~33% ~33% • KFC gained market share on delivery ~53% ~54% ~52% platforms by expanding its price ~71% range and lowering delivery fee ~31% ~29% ~9% ~10% • Took actions to reduce rider costs – ~29% e.g., introducing platform riders at ~5
Slide 8: Engaging Members to Enhance Loyalty
Engaging Members to Enhance Loyalty Grow Digital Sales Grow Members Drive Online Traffic Digital orders1 Members (mn)2 Member sales %3 65% 65% 89% 89% 90% 63% 62% 86% 60% 80% 52% 470+ 495+ Mini 410+ program 360+ 55% Super APP 300+ 240+ Local services Delivery aggregators 2019 2020 2021 2022 2023 202
Slide 9: KFC Continuing to Thrive
KFC Continuing to Thrive Q2 2024 +5% System sales growth1 328 Net new stores ` 16.2% (110) bps YoY +10 bps vs 19 Restaurant margin $264mn $273mn Operating profit Core operating profit2 (3)% YoY +4% YoY ex F/X Flat ex F/X 1 Excludes the impact of foreign exchange. 2 Defined as Operating profit adjust
Slide 10: Sharp Focus on Innovative Food and Amazing Value
Sharp Focus on Innovative Food and Amazing Value Original Recipe Egg Tart Wing Bucket Chinese Burger Chicken Burger RMB 9.9 for a limited time 20th anniversary – original flavor, egg Spicy chicken wings, 3-item combo at RMB 19.9 tart with marshmallow, and giant 10 pieces for RMB 41.9 chocolate egg t
Slide 11: Groundbreaking Side-by-Side KCOFFEE Cafe
Groundbreaking Side-by-Side KCOFFEE Cafe From 100 stores in March to ~300 stores in July Xi’an Quanyun Village (西安全运村) Shanghai Jiangsu Road (上海江苏路) Hangzhou East Railway Station- 200th store Zhengzhou Taikoo Mall (郑州太格茂) Suzhou Dushu Lake College Town(苏州独墅湖高校区) (杭州东站-第200家店) 11
Slide 12: Side-by-side KCOFFEE Cafe Features a Distinct Menu
Side-by-side KCOFFEE Cafe Features a Distinct Menu Coffee and Hot Dog Iced Orange Creamy Coffee Floats Thick Caramel Egg Tart Combo at RMB 9.9 Sparkling Latte 12
Slide 13: Penetrating Lower Tier Cities and Strategic Locations with Flexible Store Formats
Penetrating Lower Tier Cities and Strategic Locations with our Flexible Store Formats Small Town Mini Strategic Locations Store Format Gas station University campus Kaifeng city, Tongxu county, Bauhinia New Plaza (开封市通许县紫荆新天地) Zhengzhou Jiangshan Road (郑州江山路) Shanghai Fudan University (上海复旦大学) Railw
Slide 14: Pizza Hut Becoming More Resilient and Profitable
Pizza Hut Becoming More Resilient and Profitable Q2 2024 +1% System sales growth1 79 Net new stores 13.2% +80 bps YoY +190 bps vs 19 Restaurant margin $40mn $41mn Operating profit Core operating profit2 +13% YoY +23% YoY ex F/X 1 Excludes the impact of foreign exchange +18% ex F/X 2 Defined as Opera
Slide 15: Reaching New Consumer Segments with Innovative Products and Great Value
Reaching New Consumer Segments with Innovative Products and Great Value Pizza Dough Burger One-Person Meal Collaborate with Popular IP Burger with crayfish and chicken Super supreme pizza one-person Children’s day combo with Sanrio toys meal set (3 items) 15
Slide 16: New Pizza Hut WOW Model: A Major Breakthrough
New Pizza Hut WOW Model: A Major Breakthrough From the 1st store in May to 100+ stores in July Guangzhou Aeon Mall (广州金沙洲永旺) Guangzhou Taojin Road (广州淘金路) Shenzhen One Avenue (深圳壹方城) 16
Slide 17: WOW Model Features Simpler Operations, Good Variety and Excellent Value-for-money
WOW Model Features Simpler Operations, Good Variety and Excellent Value-for-money Fast casual format with lighter service Targeting solo diners, young and value- conscious consumers Promising initial results, driving incremental sales and profit Drinks from RMB 6, appetizer from RMB 9, pasta from RM
Slide 18: Pursuing Greater Operational Efficiency to Make our Business Even More Resilient
Pursuing Greater Operational Efficiency to Make our Business Even More Resilient Assess our operations from: RGM’s point of view Customer’s point of view Reduce business Simplify menu & Uplift operational complexity operations efficiency Best in class Best in cost Spend better Buy better Pass on sav
Slide 19: 2024 Targets Remain Unchanged
2024 Targets Remain Unchanged 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 2018 2019 2020
Slide 20: 2024-2026 Growth Targets
2024-2026 Growth Targets 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 $3bn+ Targeted return of cash to shareholders 2 1 Excludes the impact of foreign exchange 2 Based on cur
Slide 21: Appendix
YumChina Appendix
Slide 22: Second Quarter Grew YoY and vs 2019
Second Quarter Grew YoY and vs 2019 Second Quarter 2019 2023 2024 2024 vs 2023 2024 vs 2019 No. of Stores 8,751 13,602 15,423 +13% +76% Revenue ($ mn) 2,124 2,654 2,679 +1% ~ +26% Members (mn) 210+ 445+ 495+ +11% +136% Member Sales % 52% 66% 65% (1) ppt ~ +13ppt Operating Profit ($ mn) 204 257 266 +
Slide 23: Sales and Profit Grew YoY in Second Quarter
Sales and Profit Grew YoY in Second Quarter Revenue/Sales YoY Total Revenue ($bn) 2.65 2.68 Key factors for Revenue year-over-year change Revenue growth (reported) +1% + Net new unit contribution − Same-store sales decline Revenue growth (ex F/X) +4% System sales growth1 +4% 23'Q2 24'Q2 Operating Pr
Slide 24: Second Quarter Key Performance Highlights – KFC & Pizza Hut
Second Quarter Key Performance Highlights – KFC & Pizza Hut Digital 24’Q2 YoY Sales Growth Channel Mix Members order System Same-store Same-store Average Total off- Member Sales sales transactions ticket Delivery Million Sales % premise sales % YoY YoY YoY YoY +5% (3)% +4% (7)% 38% 67% 460+ 65% 89%
Slide 25: Reconciliation of Reported Results to Non-GAAP Measures
Reconciliation of Reported Results to Non-GAAP Measures (in $mn) Quarter Ended Year to Date Ended 6/30/2024 6/30/2023 6/30/2024 6/30/2023 Non-GAAP Reconciliations Reconciliation of Operating Profit to Adjusted Operating Profit Operating Profit $ 266 $ 257 $ 640 $ 673 Special Items, Operating Profit
Slide 26: Reconciliation of Operating Profit to Core Operating Profit
Reconciliation of Operating Profit to Core Operating Profit* (in $mn) Yum China Quarter ended % Change Year to Date Ended % Change 6/30/2024 6/30/2023 B/(W) 6/30/2024 6/30/2023 B/(W) Reconciliation of Operating Profit to Core Operating Profit Operating profit $ 266 $ 257 4 $ 640 $ 673 (5) Special It
Slide 27: Reconciliation of Operating Profit to Core Operating Profit (KFC)
Reconciliation of Operating Profit to Core Operating Profit (in $mn) KFC Quarter Ended Year to Date Ended 6/30/2024 6/30/2023 6/30/2024 6/30/2023 GAAP Operating Profit $ 264 $ 273 $ 636 $ 693 Special Items, Operating Profit — — — — Adjusted Operating Profit $ 264 $ 273 $ 636 $ 693 Items Affecting Co
Slide 28: Reconciliation of Operating Profit to Core Operating Profit (Pizza Hut)
Reconciliation of Operating Profit to Core Operating Profit (in $mn) Pizza H ut Quarter Ended Year to Date Ended 6/30/2024 6/30/2023 6/30/2024 6/30/2023 GAAP Operating Profit $ 40 $ 35 $ 87 $ 90 Special Items, Operating Profit — — — — Adjusted Operating Profit $ 40 $ 35 $ 87 $ 90 Items Affecting Com
Slide 29: Reconciliation of Operating Profit to Restaurant Profit
Reconciliation of Operating Profit to Restaurant Profit (in $mn) Yum China Quarter Ended Year to Date Ended 6/30/2024 6/30/2023 6/30/2024 6/30/2023 GAAP Operating Profit $ 266 $ 257 $ 640 $ 673 Less: Franchise fees and income 22 21 47 46 Revenues from transactions with franchisees 96 89 203 182 Othe
Slide 30: Reconciliation of Operating Profit to Restaurant Profit (KFC)
Reconciliation of Operating Profit to Restaurant Profit (in $mn) KFC Quarter Ended Year to Date Ended 6/30/2024 6/30/2023 6/30/2024 6/30/2023 GAAP Operating Profit $ 264 $ 273 $ 636 $ 693 Less: Franchise fees and income 16 15 34 32 Revenues from transactions with franchisees 12 11 26 21 Other revenu
Slide 31: Reconciliation of Operating Profit to Restaurant Profit (Pizza Hut)
Reconciliation of Operating Profit to Restaurant Profit (in $mn) Pizza H ut Quarter Ended Year to Date Ended 6/30/2024 6/30/2023 6/30/2024 6/30/2023 GAAP Operating Profit $ 40 $ 35 $ 87 $ 90 Less: Franchise fees and income 2 2 4 4 Revenues from transactions with franchisees 1 1 2 2 Other revenues 7
Slide 32: 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 33: ESG Key Initiatives
ESG Key Initiatives Climate Action Circular Economy Nutrition & Food Safety People 128 stores & 3 logistics National recycling network Published Yum China Encourage active centers completed put in use with 5 coffee Nutrition and Health engagement through RGM renewable energy purchases grounds dispos
Slide 34: ESG Ratings and Awards
ESG Ratings and Awards ESG Rating People & Community 4th Year Industry No. 1 6th Year Joined in August 2023 Industry highest score MSCI ESG ‘AA’ rating Industry best for the 3rd year To support UN SDG1 Industry No.1 Industry Leader 5th Year 2nd Year One of the only three companies China Best ESG Emp
Slide 35: About Yum China
About Yum China Largest restaurant Fortune 500 6 restaurant company in China1 company brands 15,000+ 2,100+ ~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