SHANGHAI, September 14, 2021 / PRNewswire / – Yum China Holdings, Inc. (the “Company” or “Yum China“) (NYSE: YUMC and HKEX: 9987) today briefed stakeholders on the impact of recent developments related to COVID-19.
Impact of the Delta variant outbreak
In our second quarter 2021 results release, we mentioned that the latest Delta variant COVID-19 outbreak, which began in late July in Nankeen, was evolving rapidly. Since then, this epidemic has become the most widespread regional epidemic since the national epidemic of 2020, affecting 16 provinces. A large number of areas have been identified by the government as being of medium to high risk. As a preventive health measure, several large cities have been confined. For example, Nankeen and Yangzhou, key cities in eastern China, the most dynamic economic region and the most important market for us, were the most affected. Zhengzhou and Wuhan, the capitals of Henan and Hubei provinces respectively, were also significantly affected. Strict public health measures have been implemented across the country, including the closure of many tourist sites. These actions led to a substantial decrease in the volume of travel, the cancellation of summer vacation trips and a decrease in social activities, which had a significant impact on the restaurant industry.
At the height of the epidemic in August 2021, more than 500 of our stores in 17 provinces were closed or only offered take-out and delivery services. Same store sales in August 2021 Decreased from mid-adolescence as a percentage year-over-year, or nearly a decrease of about 20% from August 2019. This was mainly due to a drop in comparable restaurant sales of around 20% to 30% during that month, and a sharp drop in sales at our transportation and tourism locations of around 40% to 50% of year on year, also on a same store basis.
While the epidemic has calmed down in recent days and traffic in restaurants is gradually recovering, our operations continue to be heavily impacted. As we noted earlier, the resumption of our activity remains uneven and non-linear, as regional epidemics occur and corresponding public health measures are implemented. The Company expects the recovery in same-store sales to take time.
Due to the Delta variant outbreak, the company has experienced significant operational deleveraging, and based on the current trend, our adjusted operating profit, which excludes special items, could be reduced by approximately 50% to 60% for the third quarter of 2021, compared to the same period last year. This is mainly due to the significant impact on sales deleveraging resulting from a sharp drop in sales, which is particularly pronounced in the third quarter, a strong seasonal quarter for sales and margins. In addition, as we have already mentioned, the margins of our restaurants are even more strained by the decreasing favorable impact of raw material prices, by medium to high wage inflation, and as we intensify the promotions of value to generate traffic.
Resilience helps alleviate short-term challenges
Since the start of the pandemic, the well-being of our employees and customers has been our top priority. The Company has demonstrated its resilience and agility in the face of past epidemics. We will continue to focus on the parts of the business that we do best to drive sales and build on the strengths of execution and innovation, including:
1) Leverage our base of over 330 million members, privilege programs, Super Apps and other digital channels to drive repeat purchases.
2) Capture offsite opportunities with our user-friendly delivery and takeout menu, as well as leverage our store network and dedicated runners to ensure uptime and coverage to drive our offsite sales.
3) Respond to the growing trend of one-off meals and home consumption with our ready-to-cook, ready-to-reheat, and ready-to-eat retail products such as steak, pasta and fried rice. These products are available in store as well as through online omnichannels.
4) Excite customers with new, innovative and high-value products, for example, the hand-improved pizza at Pizza Hut, which is particularly suitable for delivery.
5) Proactively manage costs to alleviate cost pressures and continue to improve labor productivity and operational efficiency using technology and automation.
Confidence in long-term growth
The COVID-19 pandemic may lead to short-term volatility, but our business fundamentals remain strong. We are confident in China’s long-term growth potential. We will continue to act to ensure the Company remains well positioned to seize future opportunities. The company will accelerate the expansion of its store network, planning to open 1,300 new gross stores in 2021, strengthen on-site catering, delivery, take-out and retail offerings, and invest in digital and technology.
Join us at the Virtual Investor Day on Thursday 23 September 2021 (Beijing/ Hong Kong Time) where management will provide additional perspective on Yum China business and long-term strategy. A webcast will be available on the Yum China Investor Relations website at http://ir.yumchina.com.
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. We intend that all forward-looking statements be covered by the provisions. of the Safe Harbor of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can generally be identified by not relating strictly to historical or current facts and by the use of forward-looking words such as ” expect ”,“ expect ”,“ believe ”,“ anticipate ”,“ may ”,“ might ”,“ intend ”,“ believe ”,“ plan ”,“ estimate ”,“ target ”,“ predict ” “,” plan “,” probably “,” will, “” continue “,” should “,” plan “,” outlook “or similar terminology. These statements are based on current estimates and assumptions made by us at in the light of our experience and our perception of historical trends es, current conditions and expected future developments, and other factors we believe are appropriate and reasonable in 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 future strategies, growth, business plans, investment, dividend and share buyback plans, earnings, performance and returns. of Yum China, the expected effects of demographic and macroeconomic trends, the expected impact of the COVID-19 pandemic, the expected effects of our innovation, digital and delivery capacities and investments on growth and beliefs about long-term drivers of Yum China Business. Forward-looking statements are not guarantees of performance and are inherently subject to known and unknown risks and uncertainties which are difficult to predict and could cause our actual results or events to differ materially from those indicated by such statements. We cannot assure you that our expectations, estimates or assumptions will be realized. The forward-looking statements included in this press release are made only 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. ‘required. Many 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 objectives at the times. and in the amounts currently forecast, if any, the success of our marketing campaigns and product innovation, our ability to maintain food safety and quality control systems, changes in health conditions public, including the COVID-19 pandemic and regional epidemics caused by existing or new variants of COVID-19, our ability to control fees and expenses, including tax charges, as well as changes in political, economic and regulatory in China. In addition, other risks and uncertainties that are not currently known to us or that we currently consider to be insignificant could affect the accuracy of these forward-looking statements. All forward-looking statements should be evaluated taking into account their inherent uncertainty. You should refer to our documents filed with the Securities and Exchange Commission (including the information set out under the headings “Risk Factors” and “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 more details on factors that could affect our financial and other results.
About Yum China Holdings, Inc.
Yum China Holdings, Inc. is a licensee of Yum! Brands in mainland China. It owns the exclusive rights in Mainland China to KFC, China’s leading fast food restaurant brand, Pizza Hut, China’s leading casual dining brand. China, and Taco Bell, a Californiachain of restaurants serving innovative Mexican-inspired cuisine. Yum China also owns the Petit Mouton, Huang Ji Huang, East Dawning and COFFii & JOY pure and simple concepts. Besides, Yum China partnered with Lavazza to explore and develop the Lavazza coffee concept by China. The Company had 11,023 restaurants in more than 1,500 cities at the end of June 2021. Yum China Ranked # 363 on the Fortune 500 list and was named to TIME100’s Most Influential Companies list in 2021. Yum China was named a leader in the restaurant and leisure facilities industry in the 2020 Dow Jones Sustainability Indices. In 2021, Yum China was named to the Bloomberg Gender-Equality Index and was certified Top Employer 2021 in China by the Top Employers Institute, both for the third consecutive year. For more information, please visit http://ir.yumchina.com.
Investor Relations Contact:
Phone. : +86 21 2407 7556
Phone. : +86 21 2407 7510
SOURCE Yum China Holdings, Inc.