Most of the upcoming stores will be KFC outlets and its new Coffii & Joy cafe chain.
Reaping rewards from aggressive network expansion, Yum China is looking to double down, planning to invest up to US$525m to open between 800 and 850 new stores in the current financial year.
According to the company’s second-quarter results, total system sales were up 10% year on year to US$2.12bn, with growth of 12% at KFC and 4% at Pizza Hut.
Same-store sales grew 4% year over year, with a 5% rise at KFC and a 1% increase at Pizza Hut. Restaurant margin slipped from 15.1% to 14.7% but operating profit rose 6% US$193m to US$$204m.
Net income, meanwhile, was up by 24% US$143 million to US$178 million, primarily due to the increased operating profit and a gain from the company’s equity investment in Meituan Dianping.
Yum China says it opened 178 new restaurants in Q2, taking its total store count to 8751 across more than 1300 cities.
“We continued to capitalise on market opportunities across China with aggressive, KFC-led store expansion,” Yum China CFO Jacky Lo said. “With a strong cash payback period for new KFC stores and many untapped opportunities, we intend to continue to rapidly expand our store footprint in the second half of the year.”
Digital’s role in Yum China’s growth
As of end-June, KFC’s loyalty programme had over 185 million members whilst the Pizza Hut loyalty programme had over 60 million members, an increase of 50 million and 15 million, respectively, year over year.
Digital payments also accounted for 90% of company sales in the quarter, up by 5% from the previous period. Delivery contributed to 20% of sales, up by 4% year over year.
Yum China’s delivery services are now available in 1,190 cities, up from 1,010 cities in the prior year period.
“Looking forward, we expect overall sales growth to moderate as KFC begins to lap several key sales drivers, including successful value campaigns that we initiated in the second half of last year. However, we remain confident that our strong foundation and commitment to innovation throughout our business will power continued growth for Yum China. We will continue to create new and exciting menu items, and leverage our leadership in digital, data and delivery to meet the evolving needs of our consumers,” Lo said.
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