Yum China's net income surged 41% to $288m in Q1
Its total system sales grew 6%, with 9% rise at KFC partially offset by 1% decline at Pizza Hut.
Yum China Holdings, Inc. has reported unaudited results for the first quarter ended March 31, 2018. It has reported its same-store sales to increase 3% year over year, with a growth of 5% at KFC partially offset by a 5% decrease at Pizza Hut. Its operating profit increased 33% year over year to $395 million from $296 million.
In the first quarter of 2018, Yum China restaurant margin was 17.9%, as compared with 20.4% in the prior year period, primarily attributable to the investment in product upgrades and promotions at Pizza Hut and its sales deleveraging.
Its digital and delivery departments have also thrived within the quarter with an increase of over 120 million loyalty program members for KFC and over 40 million for Pizza Hut - growth of 50 million and 20 million year over year, respectively. Mobile payments accounted for approximately 56% of Company sales in the quarter, an increase of 25 percentage points year over year and delivery contributed to 16% of Company sales in the first quarter of 2018, an increase of 3 percentage points year over year.
Yum China's CEO Joey Wat said, "We are pleased to start 2018 with positive system sales and same-store sales growth for the Company. The strong operational and financial performance of KFC is particularly encouraging as it successfully lapped two strong first quarters in 2017 and 2016. During the quarter, while Pizza Hut had some challenges with same-store sales growth and restaurant margin, we remain committed to our revitalization plan and key focus areas to drive sales growth. We believe our focus on food innovation and customer experience, together with the execution of strategic priorities in digital and delivery, has enabled us, and will continue to enable us, to build a stronger Yum China."
Yum China's CFO added, "As part of our capital allocation strategy to invest in and grow our core brands, we acquired an additional 36% interest in Wuxi KFC, increasing our total equity interest to 83%. In 2018, we now expect our annual new build to reach 600-650 units, increasing from the previously announced 550-600 units. We will continue to invest in digital and delivery, which we believe will drive long-term growth."
