SHANGHAI, Sept. 14, 2021 /PRNewswire/ -- Yum China
Holdings, Inc. (the "Company" or "Yum
China") (NYSE: YUMC and HKEX: 9987) today updated
stakeholders on the impact of recent COVID-19 developments.
Impact of the Delta Variant Outbreak
In our second quarter 2021 earnings release, we mentioned that
the latest COVID-19 outbreak of the Delta variant, which started in
late July in Nanjing, was evolving
quickly. Since then, this outbreak has become the most widely
spread regional outbreak since the national outbreak in 2020,
impacting 16 provinces. A large number of areas were identified by
the government as medium to high risk. As a preventative health
measure, several major cities were locked down. For example,
Nanjing and Yangzhou, key cities
in eastern China, the most vibrant economic region and the most
important market for us, were the most affected. Zhengzhou and Wuhan, the capital cities of Henan and Hubei provinces respectively, were also
significantly affected. Strict public health measures were
implemented across the country, including closures of many tourist
locations. These actions led to substantially lower travel volume,
cancelled summer holiday trips and fewer social activities, which
significantly impacted the restaurant industry.
At the peak of the outbreak in August
2021, more than 500 of our stores in 17 provinces were
closed or offered only takeaway and delivery services. Same-store
sales in August 2021 declined by
mid-teens percentage year over year, or close to an approximately
20% decline compared to August 2019.
This was mainly due to a same-store dine-in sales decline in that
month of approximately 20% to 30%, and a sharp drop in sales at our
transportation and tourist locations of approximately 40% to 50%
year over year, also on a same-store basis.
While the outbreak has subsided in recent days and restaurant
traffic is gradually recovering, our operations continue to be
heavily impacted. As we have previously noted, our business
recovery remains to be uneven and nonlinear, as regional outbreaks
occur and corresponding public health measures are implemented. The
Company expects a recovery of same-store sales to take time.
As a result of the Delta variant outbreak, the Company has
experienced significant operating deleveraging, and based on the
current trend, our adjusted operating profit, which excludes
special items, may be reduced by approximately 50% to 60% for the
third quarter of 2021, compared to the same period last year. This
is primarily due to the significant sales deleverage impact from
sharply reduced sales, which is especially pronounced in the third
quarter, a seasonally strong quarter for sales and margins.
Moreover, as we have previously discussed, our restaurant margins
are further pressured by the diminishing favorable impact of
commodity prices, by wage inflation of mid to high single digits,
and as we step up value promotions to drive traffic.
Resiliency Helps Mitigate Short Term Challenges
Since the onset of the pandemic, the wellbeing of our employees
and customers has been our utmost priority. The Company has
demonstrated its resiliency and agility in responding to the past
outbreaks. We will continue to focus on the elements of the
business that we do best to drive sales and build on the strengths
of execution and innovation, including to:
1) Leverage our over 330 million
member base, privilege programs, Super Apps and other digital
channels to drive repeat purchases.
2) Capture off-premise occasions
with our delivery and takeaway friendly menu, as well as to
leverage our store network and dedicated riders to ensure
availability and coverage to drive our off-premise sales.
3) Address the rising trend of
single dining and at-home consumption with our ready-to-cook,
ready-to-heat and ready-to-eat retail products, such as steak,
pasta and fried rice. These products are available in store as well
as through online omni-channels.
4) Excite customers with
innovative new products and great value, for example, the upgraded
hand-tossed pizza at Pizza Hut, which is especially suitable for
delivery.
5) Proactively manage costs to
alleviate cost pressures and continue to improve labor productivity
and operating efficiency using technology and
automation.
Confidence in Long-Term Growth
The COVID-19 pandemic may pose volatility in the near-term, but
the fundamentals of our business remain strong. We are confident in
the long-term growth potential of China. We will continue to act to
ensure the Company remains well-positioned to capture future
opportunities. The Company will accelerate its store network
expansion, expecting to open 1,300 gross new stores in 2021,
strengthen offerings for dine-in, delivery, takeaway and retail,
and invest in digital and technology.
Please join us at the virtual Investor Day on Thursday, September 23, 2021 (Beijing/Hong Kong Time) where management will
provide additional perspective on Yum
China's business and long-term strategy. A webcast will be
available at Yum China's Investor Relations website at
http://ir.yumchina.com.
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. 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" 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,
investment, dividend and share repurchase plans, earnings,
performance and returns of Yum
China, anticipated effects of population and macroeconomic
trends, the expected impact of the COVID-19 pandemic, 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, including the COVID-19 pandemic and regional outbreaks
caused by existing or new COVID-19 variants, our ability to control
costs and expenses, including tax costs, as well as changes in
political, economic and regulatory conditions in China. 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 captions
"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
additional detail about 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 has exclusive rights in mainland China to KFC,
China's leading quick-service restaurant brand, Pizza Hut, the
leading casual dining restaurant brand in China, and Taco Bell, a California-based restaurant chain serving
innovative Mexican-inspired food. Yum
China also owns the Little Sheep, Huang Ji Huang, East Dawning and COFFii &
JOY concepts outright. In addition, Yum
China has partnered with Lavazza to explore and develop the
Lavazza coffee shop concept in China. The Company had 11,023 restaurants in
over 1,500 cities at the end of June
2021. Yum China ranked #363
on the Fortune 500 list and was named to TIME100 Most Influential
Companies list in 2021. Yum China
has been named the Industry Leader for the Restaurant & 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 as a 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:
Tel: +86 21 2407 7556
IR@YumChina.com
Media Contact:
Tel: +86 21 2407 7510
Media@YumChina.com
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SOURCE Yum China Holdings, Inc.