YUMC - Earnings call 3 2023 | Yum China Holdings, Inc.

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Operator

Thank you for standing by. And welcome to the Yum China Third Quarter 2023 Earnings Conference Call.I would now like to hand the conference over to Michelle Shen. Please go ahead.

Michelle Shen

Thank you, Zach. Hello, everyone. Yum quarter joining call. earnings for you China's XXXX third conference Thank today's Ms. CEO, are On our call Joey our Wat; and CFO, Mr. subject forward-looking Andy that Yeung.I'd which contain our you events are statements, earnings call uncertainties. like and investor to to future remind and materials from differ forward-looking statements. Actual materially results these may in included All statements in with SEC. statements our considered release and with the in filings forward-looking earnings conjunction the be cautionary should our risk factors the includes certain non-GAAP financial also measures. call This

GAAP measures. should included measures consider and comparable of You is GAAP our Reconciliation release. carefully earnings in non-GAAP the

can this Joey? You China. website.Now, call a PowerPoint Joey turn find like the to Yum would of IR our and Wat, a webcast CEO over call of presentation I to on

Joey Wat

Day investors growth. in wonderful X.X in It and was to our we strong China. face focus September you on Hello, us everyone, today. Investor thank Xi'an, meeting At joining with a RGM unveiled for the face. strategy event, We our held

for have These targets We quarter.Our $X X XX,XXX growth third and and shareholders CAGR double-digit billion ambitious continued let's reaching reflect share by returning strength. to years. mind, our into in zoom include set XXXX, commitment long-term With EPS results the dividends achieving growth the repurchases. coming in stores

healthy quarter maintaining record store Third profit, the payback net XXX stores, new adjusted store with while all and periods. levels. operating new net revenue reached openings accelerated in We new quarter, stores

led and resources bolstered strong ensured pipeline transaction billion.Our currency. in X sales team's supply year-over-year excellent X summer portfolio operating results. System in in now year-over-year campaigns. first profit In quarter To remarkable growth. drive these grew driving excluding constant traffic currency. service, peak was the in produced operating efforts months, exceeds third the Adjusted Our temporary exceeds stores. the grew for execute constant XX,XXX profit, growth Same-store by relentless XX% trading adjusted we relief season, crew USD XX% sales readiness sales

locations their cautious transportation consumers XX% It's tourist same-store be at year-over-year. though, holidays, During the surged sales important in more to spending. our and to summer that continued remember, than have

has food, simple; good formula capture fun growth exceptional sales Our to and always value. been good

through we on a innovation Now, quick have what done.First, me let go scale. food

perfect million $XXX past quarter, Recipe is include years. in is ability Chicken huge our and it combined Juicy these style boost we Beef Whole categories sales. Chicken, building at to categories Szechuan have than Day from consumption. of a This Investor Chicken, continuing innovations mix. big been success the XX showcased new illustrates with which Recent This X Our in also our over things [Foreign Friday perspective, put sales Whole Language] only. KFC our Burgers. our Whole at third to the Spicy club KFC It Original exceed innovate X% Chicken these into shows higher fill proudly very Spicy to like but serving flavors Sunday home China in are expand categories to offering categories.We for To

pizzas Burger, over out Durian year. nearly more in love X with collaborate of million X Language]. Pizza Hut, million sold over them. pizza was XX pizza, X.X sold premium of Durian just also we At our the [Foreign Beef the Cheese Ultraman XX% We promote a pizza, every Consumers we X XXX Ultra to year-over-year. first months

enough. existing our of that campaign. a we Our pizzas, on for offer to below are this do capacity priced to ensuring [Foreign Crazy RMB of and opportunity in-house value ingredients are significant priced more. are we are the of we keep Language]. our Nuggets, for is currently Language], operational as while products love. the pizzas pizza new take Spicy Pizza just It food. phenomenon. efficiencies.At KFC market. pizza that below to is adding Pizza around money our our and that pizzas will suppliers and has XX, exceptional consistently we Hut, such Crazy satisfy supply the longer expanding marketing involve chain expand overall XX% amazing are new worked Hut. by Thursdays, supply no Durian top customers lower-priced secure with innovator offering sales we that's very demand.Second, [Foreign enriching simple growing tapping Thursday over is regularly by become We cultural We To customers Other not third and selection with could portion outperformed offerings, other into customers snacks a By Around cooking days substantial the provide underserved RMB value flavor quarter a process chose XX, launch in than engaged, variations which we XX%. utilize

Cheese Our Language] compared amazing in item best-selling having users September traffic to a easy an driver our engaged [Foreign not driver, and the way. snack traffic new to along keeping and tart, for snack became Pizza.Next, fun be

healthy the good and over athletes stores social high too. enough XX% from Pizza be to from enough attract that nearly in in Notably, year-over-year. or event. active collaborate fans showed athletes food XX%. young be up Our and news continue new for new pop chosen campaign of customers. members with million pop-up and the from XX proud loyalty the KFC western X campaign the the and that's a KFC's huge fantastic many of XX% from of were members food sporting and icons XXX publicly adults, exclusive resonate it China significant Asian professional up Hut Games catering and came are set [Foreign Over XXX for for million to Language] serve with crew QX, buzz generated young a Almost and Hangzhou. and served with traffic at our members supplier portion generated across sales to members programs brand.We that is at generations. culture our We topped in

strong hard all to our exclusive want ran also Super offering celebration.In restaurants gifts for at a through thank We of their our campaigns, nation-wide closing, our delivering in in APP quarter. teams I and work

convention about excellent celebrate an hold RGM Restaurant in-person XXXX. and occasion will for goals year we our marks to our achievements XX,XXX honor first Managers. It's General coming Very since reaffirm RGM's and convention beyond. it. dedication, our for attendees the the our for our week, Next This excited

Looking growth. growth in us environment post-pandemic moderate us stay RGM X.X in even China vigilant. to to forward, and the the preferences remains strategic economic sustainably. provide vast consumer with framework the potential grow Evolving require agile

enable the over I'm to to long-term innovative shareholders.With Our we Andy? robust value conditions. adapt Andy. to market turn I create chain our supply changing and ecosystem call us continue confident can to will for digital quickly that,

Ka Yeung

Joey, Thank you, and hello, everyone.

a I But exchange foreign do impact achieved the our much revenue portfolio. grew point On that, X% XX% profit you adjusted have larger a year-over-year in out me in solid results, across performance. growing quarter. we want Let grew XX% constant currency. Compared to store before operating levels, key share I with quarter had a negative basis, we approximately and third Overall, of to metrics. pre-pandemic

lower while contributed delivery Although, X% same-store $X.XX year-over-year, traffic lowered lower sales system quarter and delivery successful tourist through X%. These a than compared orders, of average average average X%, that, ticket mainly let's strong promotions, were the mix mix, currency, With to remain thus the in driven levels, and revenues total grew financials XXXX. by driving at transportation grew rebound XX% decline tend go were XXXX a sales sales X% reported to daypart.Delivery year-over-year in billion a approximately brand, dine-in growth XX% rebound more X%. driven currency, a the a in constant by traffic System Same-store growth. constant grew revenue year-over-year typically sales of KFC year-over-year. sales locations decreased in average. sales The ticket mainly results By increased same-store the orders Dine-in to and XX% same-store ticket carries breakfast of Breakfast well. higher increase. have was continued as currency. ticket new growth to XX%. In overall unit at rebound contribution also grew total detail.Third

in to the XX% ticket X% XXXX.Pizza breakfast growth, traffic sales Please to quarter similar higher the contributed highlight design. and year-over-year. second to same-store So, ticket in Same-store and average the X%. rebound quarter overall decreased but grew note want sales grew Hut traffic that was ticket average by third than that We lower average.

and enhance represents which a Pizza Consistent value plan, value the Particularly, markets. enhance price Hut's we our We segment range, proposition underserved their are to capture ranges are Pizza very want consumers. we to revitalization expanding of pricing to proposition Hut to China. with XX Pizza in targeting significant Hut's market sub-RMB the pizza

increase to the time. mix intend also dining We off-premise delivery and over sales of

dining. than For sales generally lower have average a Hut, Pizza ticket delivery

into lapping single-person aim the Finally, of which This due customer margin existing sales relief compared family basis points dining.Restaurant the different year. mainly to was temporary or million, segment group to base, market to which of was of points $XX XXX meal. This tends basis XXX impact. prior be than to we XX%, last Hut's margin translates Pizza year's bolster lower is

is normalization points. only basis Excluding impacted Wage the promotional at this margins. impact, XX margin year-over-year inflation also of level, store activities increased staffing change

million, was side, utilization traffic Two traffic prior stores normalized oil items. favorable benefiting annual occupancy compared that for XX.X%, other offset and mid-single-digit higher as XX.X%, were key other to benefited We and expenses, sales was XXX improvement XX.X%, at ongoing basis through including cost relief This the comparison points wage Cost poultry increase staffing one, points year, Cost and prior quarter. higher than depreciation year-over-year, the by drive primarily improved prices of were go last level than leveraging $XX year. labor cost as margin expenses. wage of into adjustments; increased partially promotional more translates faced sales staff and prior key of commodities, effort.Now, structure higher the point to than rebase drive in also for These XX Last sales other and chicken. benefit activities offset due frontline rent of we partially basis from XX cooking sales well leveraging.Occupancy year, factors the we labor basis prices year. impact. to due year. and points by XX our as the On well lower was pandemic the impacted full And let's the temporary was in two, sales. from of beef as basis to which

constant measures merit constant expenses in increased currency. accrual from and our year. and We relief stores depreciation upfront lower that portfolio XX% lapping by secure new and terms have million offset stores, after been incentives of note $XXX pandemic extent, to in rental rental of resumption higher continue profit G&A partially XX% XXXX. with and expenses lesser resulted to increases of important $XX million, from our associated austerity favorable higher This lower travel year-over-year is travel.Operating was currency, mainly the a It built optimization. was from business X% in to last investment performance-based increasing for store more of

million $XX temporary currency. in Excluding year, constant grew XX% operating last received profit in relief adjusted

Our rate XX.X%. effective tax was

We full million to continue reported was in to our be and Net increasing both EPS expect tax $X.XX, rate diluted $XXX around XX% year was currency. income XX%. effective

third Excluding exchange $XXX and generated million XX% free to net the full foreign $XXX million million dividends increased in We operating in on XX% and diluted in shareholders flows the EPS, in to return in the impact, quarter, $XXX million returned flow for currency. share We cash the XXXX. cash in quarter. million track cash $XXX constant income to year and repurchase $XXX

billion of quarter.Now, to sheet with $X.X by balance turn net Our the in end strong let's position cash outlook. around our third the remained

new stores new net we in and year-to-date. XXX Regarding stores net opened opening, the store X,XXX quarter

XXXX payback our period We new at KFC X,XXX our year meet together we Day. are store unit Pizza years, are on and X,XXX track to X new to payback Hut XXXX, With our X reach stores. healthy target healthy unveiled modules, to for store with The flexible new and and as our Investor years full net remains we XX,XXX formats stores confident at of by respectively.

is seasonally and for a both sales Looking quarter quarter ahead, small the fourth profit.

sales October. extended the softening late the since conscious. which On we front, Consumers value demand, have observed have to September, more become

sales in pronounced into food margins, widening tap underserved the the to have ranges factor. impact remain innovation and pricing We have quarter. drive to fourth focusing been growth.Regarding may biggest markets in sales on margins a Fluctuation on

in this million last temporary in quarter relief, reminder, a to received As repeat the year, we which fourth we also do year. $XX expect not

wage stores. also digits of returning We our to inflation staffing at normalized and mid-single anticipate levels more

process. last post-pandemic experienced wave-like is the infection.The COVID Just be a labor non-linear due year, in quarter to shaping shortage we to widespread economic up a recovery fourth and reminder,

will driving and we So, sales maintain focus on efficiency. our cost

trend towards recovery metrics our the However, and are this many evident is overall new setting records. performance year of

opportunities seize preferences We to ability have market quickly demonstrated our conditions. and adapt under changing to different consumer

execution successful delivering you and our both I that, the profits, value Michele? RGM sales shareholders.With sustainable us back returns long-term will of confident grow are our store help X.X Michele. expand to creation We that strategy and will to portfolio, pass

Michelle Shen

Thanks, Andy.

questions. people time.With Now, one please questions give To open ask we your Q&A. will limit to more call always please for that, the the at questions, start to chance a the

Operator

first Sachs. comes [Operator question Michelle from from Instructions] Your you. Thank Goldman Cheng

Michelle Cheng

about is the mentioned the Especially turned softer of September. end the question My trend you that competition. since

how also, should this with the we landscape with and do the share top you between the campaign, the evolve? us growth you competition how And can think So, control? also, value about balance line full cost see

Joey Wat

Michelle. you, Thank

the and chain Regarding the domestic in business positive if voting to very competition towards Investor despite trend China, particularly we especially money and feet, that's with are the in model. remember lower-tier plan, in and China industry. our that in back good shows On in macro voting opportunity vibrant our opening you our a their both there's situation that a concern of very lot aggressively our and consistent is are resonate players in to players, for competitors towards view view Again, aggressive the competition, with and we store that of that international in And business see industry because with store because the cities. that, our as lower-tier the well have their investing we in top That these the cities. sign media, Day, city. reality, see lower-tier the

comes see then to to when consumer. happy point the value-driven about it that.And quite we're So,

rational We have more benefited player for cautious that consumers. from been the and a spending has the more

When for a value-driven, We a company. it's us. more food fast are becomes customer good

very we because been fun products but you do years, a ticket As not do. in value company far as we our it for we have is And customers. that.And to average. And for the experience focus in has never our to consistent see innovative our and can have enough consistent quarter, itself we'll that this capability deliver, continue only to been many value focus past the and with

But about price we And our ups With still the very more XXXX, see stable the growth then even and with we TC year and sort because every the same, Hut but opportunity of up bit better transaction a of average are quarter, you ticket cannot during TC the good get and to has a for year last little careful original average in it. we kind in turnaround to And have the stable. be been product. we down, compared Pizza the of the growth is keep We price bit is see relatively new our growth. increase last the product, business, more so healthy it time ticket the can can had TC. very

value So, not we very deliver read agile it but we products, doing [Technical product and very all shows them these sales.Last, we the are we the quickly while we are get least, innovative and Difficulty].

our very with value is important. our innovations prepare to able campaign and are and that We margin

our it of lines our of margin, which already O&O reduce There's the that's money structure. serve We But customers. cost what service Andy protect. the some Andy has pre-pandemic. that XXXX, and we rent, on. food margin between the we put There's year-to-date to will sure, fact, into later and some we go I'm different exceeded the restaurant reduce the and is movement, through movement In

us role competition for our industry it's you, see Thank for net-net, So is market. because Michelle. and we confidence our of a good

Operator

from Sijie from next Your question CICC. Lin comes

Sijie Lin

regarding question margin. So, I have one the

quarter only if X%, reasons increased the So, but QX. QX But behind different compare which quite same increased and margins we our QX with profit XX%, year-over-year XXXX, in Andy operating revenue is with the the has mentioned change.

please better help could understand So, you this? us

Ka Yeung

questions. Sijie, thank you for your

look to impact And increasing comparisons, we is relief so expenses.And partially obviously, able as in item, was other labor when by you by see continue we're our at compare definitely is over years, look we we to the you occupancy which year-over-year But And mentioned, if need if to few few offset to that improvement actually you stable, see the that you the the past the over around and XX%. at out last pretty then past temporary years. cost take O&O, year. from XXXX, that the

wage mix mentioned, as of a delivery, some COS, of there. seen we and increase because inflation Our higher have

O&O rebase we to structure our However, from you on that rent initiatives if other better, the side, are to mainly offset much benefiting possibly we negotiations lease store and and have optimizations better portfolio at and the level look bit quarter, cost also is for mentioned sales in a we same-store in fourth profit. ahead terms quarter fourth looking of at as and looking of little us the is sales, smaller the which a -- XXXX.Now earlier, about quarter terms, XX%

have as And so have mentioned, we in some demand September. softening we seen

have pronounced and sales will on the a more So, margin. profitability impact fluctuations

fourth mentioned me long-term improve year, received Now million and at Obviously, margin $XX our mind. the in to -- to the work at it every staffing last to goal inflation temporary a wage which of Longer over we hard potentially just term, short-term It's our impact maintain Day, a and repeat long term. commodity this continue as let stable inflation, wage year.Now, last to Investor we is have again, and have you expect wage to of in inflation relief, important quarter our in offset balance mid-single-digit again, repeat year time. potentially keep not stores. to and it we compared levels normalization do we to year, have inflation, we a

structure to We will for cost time. long place in rebasing from a effort continue that stay benefit will

For example, staff high megastore restaurant our level sharing program. rent,

model. store our from investment low and flexible more have also We

term. also productivity. in maintain how short we That's the will both long to look we at efficiencies margins improve our term cost and So, discipline and continue in

Operator

Christine Your next comes Peng UBS. from from question

Christine Peng

question, actually a is management. related competition, terms also in Chinese which this but you, have I details want to to burger. of ask more I Thank style specifically

KFC Day, investors Investor plan actually very the in burger your near Chinese future. shared Xi'an, style with KFC's the think launch I products in management in to the

timetable product terms us in well share strategy of So, more this can as management strategy, as with forward? specifics about the price product going

Joey Wat

launched provinces We particular. in in Fujian particular Christine. actually X have you, Tianjin, product Thank already, test this

affordable. are result we cities. to move So, then and do Shanghai. second-tier the on happy test when -- not price very to it's competitive. strategies a progress The lower-tier But But in cities, plan it's work one we taste our more with are accessible product we the at Beijing I good in different point the that next been We interesting ready. stage margins It's or for we still it it myself. well. continue of is And great. feels and instead It has the pricing. Guangzhou, that the the our same And time, it's and for and the we we business. of maintain product have launched the slightly going

don't try Christine. get we Thank closer travel next hopefully, you, it. So time, that to Kong, it far Hong to can have to where you

Operator

question Bank America. from next comes from Your Chen of Luo

Chen Luo

my competition. So, on is question also

question well TikTok, count in Xi'an, QX near year-on-year initiatives do Lastly, a more in time And campaign few coming offset few under quarters? also the testing ticket think on of as and would we And in last enough the percentage be in average on our do can fact, some coming of could terms as the quarters? could basis I be decrease? food as our on a increase value that actually to saw paper it a sales, price we that that our cost of the I pressure sell our rent current the into think to term, average the you ticket coupons In decline extend into to coupons. broaden raised the TikTok given think likes and

Joey Wat

our And Let but look ticket they big ticket we best lockdown the point unusually ticket sort slightly that we we although people ticket average the at compared very to order average is last they is is The year, comparable comparison with of were ticket [Technical more the XXXX. different compared because XXXX. me ticket average -- because Difficulty] can compared high business average when is year the XXXX, order, normal just is still at out pandemic, the right? not compare to the exactly is What average high home. during more size, is in

is that So, normal. of sort more

investor at is when drop sign. sales ticket our average good asked compared And year.And I double-digit always fact grow concerned focused almost to usually, to is the So, not number move, overly our last that more be the our transaction, about TC. a TC

go years, So, is in X business over go see beyond quarter, many always ticket stable. our you average just years, will or years the our through XX X many, rather

address average. hopefully, that's ticket go And So the on. your about concern

Ka Yeung

Yes.

TA. both address just me Let

of compose As if is of what we And [indiscernible] I decline prepared but to a try have TA than have to tried at, we that decline one If year, TA. And tracking for right? of a to mix or it's look only KFC, as store. very people mix, last XXXX remarks the seen the promotion the it's delivery mentioned. part as then them, to compared compared right? for look XXXX. that, in to -- Joey the Obviously, returning you in in delivery will you today, example, what the is part higher for is still is We

impacted the will component.The one TA also mentioned other than pandemic, higher more TA. was because than the which if so for daypart, have that have other TA look breakfast year, the so though an rebound is breakfast we daypart, you on impact KFC also breakfast about delivery is the example, right? the at daypart with So, in And KFC, to obviously last dayparts even dining the tend for

breakfast increasing that. the So, impact for also would on traffic daypart

manage drivers TA. points at points, you XX only for if Compared last it's right? with our basis line, right, difference. flat basis to ability profitability, XX compared And actually we you margins our adds, XXXX, overall number almost will look So, the that So, different there's stable, a very to our to notice store it's of have components. year,

Joey Wat

factors we've in I many able I to managed our at number cost, think stable very shared been a costs the manage because come been our all of have with we some mean and well, our as innovations chain. are -- able Day we being very that When to food there flexible driving to of back are a ticket cost, stable food commodity Investor deliver supply years. cost up Just the paper parts we've using such paper inflation, food and over

So, quite we here. I team we reminding money, internally, always And problem, when the keep too problem customers. paper quality giving the are cost and is a of it stable becomes our for become that are value food food the of not low. the food the That volume means to

So, it's paper years. the percentage cost food relatively stable many for over the

Chen Luo

you, Joey and Yes. Andy. Thank

management So, [ further also confidence in and take measures the and reshape agile to to ]. the address we have right ability stay competition

Operator

you. Thank

Stanley. comes Song Wilkin Your next question from [ Morgan from ]

Lillian Lou

This Lillian from hear me? Morgan Can is Stanley. you

Ka Yeung

Yes.

Lillian Lou

Yes.

have side I a So, question again but on different margin aspects. in

Because to from stores, despite going impact store think of labor forward, staffing losing this going keep of and to any subsidy think to margin? there up expansion pace. this is impact all normalization acceleration the I expansion I we're

about margin the margin. on impact to given to to situation? get faster So, how unit us kind a should such of think base, kind some color of we Just maybe of quantify wanted expansion the

Ka Yeung

you, Lilian. Thank

healthy. opening, to So, our when net we be continue look store they very new at

Pizza for at for look overall for Hut. still opening, payback period cash our new KFC is X you store years X If the and years

mentioned, actually better. model store performance fact, we as is In the

period the at if up, new stores. ramp-up a how Now, for obviously, ramp there's they look you

openings, stores have they very and performing new X way it terms large pointing store And of margins year how the model up tend the is unit the We we impact short-term stick we disciplined we economics, lower, a our payback, up opening.So, investment market. as also because and it's months in store when are no mentioned of there's as then open going from in unit into with in and It economics. at making stores And tend for they're about have ground new a of first healthy -- to actually a to long they the a our we mentioned, have in change be breakeven good, the look our as for cash those but are at or will X sales ramp to to be majority continue important been terms look by just progress very openings as year. us to plan. in our from indicator our driven may we some

So, we of acceleration have based the performance on the store.

question next Ling Anne from from Your Jefferies. comes

Kin Shun Ling

current regarding the Questions trading environment.

or any to little bit on it You like like certain is event that there that it more perform as process the about guys a you drives in regardless bit of what that, like fluctuation. Maybe little little yes? that? you're we'd anything sales a love products mentioned performance hear we geographical about being softer like softness? fall-off sales innovative that do noticed with and didn't that about you like like area, there you that launched? Or is expected. because like a Is certain Would bit really elaborate Is about a promotion can talking daypart a like like of or of terms

Joey Wat

in some the So there's was mean, level, demand. July, particularly summer -- of I high vibrant, at kind

quite a earlier, traffic helped holiday as So, national transportation is And mid-autumn at first here, half national is, as beginning actually, time, at same the holiday. the it's just increase observed mentioned Because year-over-year, the holiday this interesting XX% during national of October, first sort good half we of it the year, this comes during I the particularly year, which festival. reason really the second half then to and sign.

half Go there. after then a do? see mid-autumn family, years we do we massive festival home, X going home.So, back half first see we and people, customers see during the for holiday, what time of the So, of to number because go softness the spend Chinese their first

soft. after decided decided then little moment the holiday, bit. half I was -- that a by demand the think people And of the So, second still to travel

So, actually traffic the the picked October the up. half of second festival

That's quite of festival. that Well, we we spending still going. on, is during comes on bit doing point human pretty our pizza the we we result well, good to well. it bit are two a is little premium but product, less terms behavior premium the holiday Actually, our in this what third range. national see going spending, about little do and the also with natural of there's it? have product, a price doing been happening there's And is been have cautious trend consumption, working October a widening mid burger, do the customer are point to premium quite the then So, one.And point during the

only So, it's the themselves. large base, treat festival time. themselves serve the who want during customer bottom, because want to always very cheat a customer top end, same who some still there's and The to customer we

Beef is Burger, the we cetera, et enrich price Pizza also time, premium at Hut, do entry offering. the same example. a pizza will the So, that.But good

We pizza, have from for as coming domestic XX. in both fact, this segment big And this revenue big opportunity below is We a a sort see of RMB and very a here. single-digit international players.

also in see KFC, choices meal customers, sector.And market we cities. for in could our Hut to to X XX more imagine, opportunity meal only entry particularly Not customers is have people. our the So, Well, business we untapped the the for single and we share the also more but number X-person the lower-tier good do per person transaction business, offerings continue model, capture price have and of at Because RMB it average in get and shows the that more we X-person this And segment. we of products to those that in particular you Pizza products of can work serve then more as on below the potential meal. well. progress over

on So, point And therefore, daypart, the support that's revenue, weekend. X is we we weekday top of of the And been good in to way see constant bit is for wide record doing at revenue why weekday do. are results still a thing and And has Whole from the doing which on that traffic, terms traffic problem. cities. Chicken, our our record we is foreign it.But can well. consumption soft lot in focus see X, range certain price therefore, the the still we're at-home profit, of doing right the good behind us is customers. for mainly But biggest better what to is operate other reasons all and a very quarter And we of Tier course, delivered and focus products growth. that we very we quite currency, that, X% a a the weekend traffic the exchange than the of have our profit. But challenge which product, On

still things that for will product continue very So, focus experience, we at really mentioned, few I price and and the the shareholders. put on good good good and but to the investors margin

Kin Shun Ling

business? franchise ramp-up talked lot regarding latest And business. update this with We about captive hospital, muni the the Day. can during the I like franchise you the share and another on i.e., specialty ask with us those will your highway the a we the also like centers? see Can Investor -- question franchise, Where those

Ka Yeung

Right.

So, if you this quick one. to like about be

our at year. compared -- look for pretty third new number like XX%-plus to growing example, it's last of we franchises As the fast, quarter, franchise

for And openings. store so new

making we're overnight. progress It's think come to there. to But going obviously, I things So, not is ramp. going to happen

we So, at look how it. that's

from Ethan from Wang CLSA. comes question next Your

Yushen Wang

So, question on sales. my same-store is

consumption understandable see good space more that and we yes, and Hut more that Pizza at China traffic. KFC to it's And competition. ticket the promotions space So, have put declined, drive but with to consumption is

on there's going is people, I on So, understand staff, it's but some just delivery, hikes your from thinking and ticker but the we to always ticket would from wanted you I need some with color labor We cause because on if more traffic, impact more sales a comes have pressure the have more that decrease understand on But just to we have lower. especially balancing margins, this we price the wonder, maybe act. orders, forward. future trend price like going to the

Ka Yeung

Okay.

me try So, that. let to address

try story there are of it. to not folks to terms the I Again, part X at of of bit even key look Obviously, detail. the little part that's activity. of help driving have understand that. mentioned a shift, KFC number questions of you But TA, components So, in a if concerning main and promotion let the me couple TA only you in more is think TA, have traffic people

the what seen the delivery. right, group last like and lower have through right? buy So year, very come delivery back, also ordering delivery academic, We when high delivery especially last we we mix shift, year, have during call delivery

And so when this we slightly do be see year normal, when lower year. last things return mix to more the delivery than to

that's store. because normal people so And the back coming to are

some is, on that's shift, They impact.The we have that. about also also right? dayparts, an one there's as other would impact mentioned, And so

have mentioned, we as lower a breakfast, For TA. we generally,

target would so actually when activities, of Single a to promotion see design, the the then is trying that impact Hut, slightly Pizza differently on faster, And overall mentioned, as are we by we KFC. TA because have maybe or you also big growing market, right pizza is Hut, very which overall, which in number part there. a is RMB underserved and of which are clearly the by but a market below is active very XX tap now, Pizza obviously of segment, players it's

it's TA other want then and Joey and that have meal well, Hut, So, TA single-person a if always that see look have high of Hut, penetrate the also of Pizza part mentioned, purposeful Pizza Pizza you Hut, group is set. as pizza is TA. then we KFC, for targeting at for will market.The to our in you And dining. in had dining because that family you one

you're was pandemic, a actually you especially their before Hut ] and TA product buying if program position challenge going we person before have purposeful for biggest we And set lunch of consumers. done single see proposition high [ finally, that to and Pizza increase job defines for new whatnot, at value to when look there. the particularly shifting So, that have working even mean to consumers.One to the the their

the we've and been hold And hard to price working that. very drive so stable whatnot and

why going a when Because pizza to expand try pricing And base, address that's range. going a customer so to bigger, is doing have to wider by you're and design bigger that.

over expect continue there. has movement that's so there why TA a to And

So, there's a all lot our XX%, product innovation. on, going that of components that there by our very strategy.But the see you have Because key despite stable, point right? we is that's stuff COS that

a very managing strong chain We have that. supply

we to the same at balance market addressable a how maintaining the traffic, keep between time, our want and that's driving out overall, expanding So TA.

got for on COS, concern whatnot. long is the there change in biggest obviously, Now China their and term

very thing to us our one, been can we're pandemic important that's workforce. to productivity, for digital to doing And long to conformation trying time. quite so we've and you to pandemic, off invest about and continue expanded as before that that, so it's overall the XX%. that improve mentioned, in XX%, at the pretty stable continue the successful improve And we And our and operations the over also margins coming maintain potentially labor

Joey Wat

beyond shared in people Maybe Day, add the our color [ X,XXX X actually. look Investor the COL or in people have over If we years, we quarter, some I'll last we just have particular. ] X,XXX, when a COLs stores, on look our as few XXX,XXX stores, just thousand we few we XXX,XXX

Now stores, XXX,XXX almost still have we have we people. only XX,XXX double,

about when COL, say, And balance of that team we're an and promotion a amazing, and store to products impact important. to quality very items the pick the in how the of as food to the -- and that and do term in mentioned it we our ingredients in We would cost.When it store. to and in that's having second my that and the the make. most Andy utilize protect term. the handling order deliver as in on easy labor maximum COL, well, tend we of comes can use more of staff short sell that important we manage prepared existing I with managing was is pretty comes none sort many good the handle to have mentioned, So operation why to number can dedicated And careful those I long are to the automation, while very they remarks, we items digitization

Operator

Your from next from question Citi. comes Wei Xiaopo

Xiaopo Wei

versus having quick I high-tier the And quarter, for widened margin the et margin. In any prepared remarks do rent third lot follow-up are in have stores, also, explained concession cetera. a you restaurant question a city divergence Andy, restaurant about of you city? of we on see new low-tier

keep to sales the forward, to inflation been good in to Looking X expenses expect a market? occupancy very and other other ratio because shall restaurant factor this low we in the years, our past component mitigating has

Ka Yeung

Thanks, Xiaopo.

still cities, higher we in have terms smaller out, are But labor to store, slightly cost, I margin Tier because lower, there's in have think the at all store. rent. material and X before, mentioned as high-tier although divergence, and that. throughout of high you cities. have lower-tier a So changes costs the not X through you throughput cities, those actually labor the And the pan Tier way have in the obviously, cities, generally margin then generally, a lower Generally,

slightly their is margin different investment all-in-all the is other higher the also So, lower-tier tiers. in cities. But in investment, because different

-- up end we for payback cities. good both top-tier period a So, have pretty and lower-tier

impact. stable initiatives and including optimization. other contracts cost then you all-in-all, that's in also obviously, think like we those and we temporary you O&O, have long-term got you relief. are tier in terms I last there. different between so the when favorable terms have some And see cities.Now get long-term But as margins of continued Those contracts And mentioned, longer-term improvement had in structure of variance lease, O&O, year, we portfolio even

you O&O pretty improvement think for how we get, think of to But also that's of in the I as I a long obviously, rent. So, think terms ones would can in be I But the run, continue going free give O&O we'll stay. percentage sales. lower healthy to

Operator

are no There time. at questions further this

Michelle Shen

Thank call you for joining today. the

and the questions, website.Good-bye. For out information our further earnings release contact our reach please through in

Ka Yeung

Thank you.

Joey Wat

you. Thank

Operator

Thank for conclude does conference participating. today. you for our That

disconnect. now may You

Yum China (YUMC) 1 Nov 232023 Q3 Earnings call transcript