YUMC - Earnings call transcript Q1 2024 | Yum China Holdings, Inc.

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Operator

Thank you for standing by, and welcome to the Yum China First Quarter 2024 Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to Florence Lip, Investor Relations Senior Director. Please go ahead.

Florence Lip

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

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

otherwise the this results our growth during You webcast can presentation note call, PowerPoint today's and exclude on the find website. that noted. Please of unless call impact year-over-year a of all IR currency foreign

like over CEO call would I to the turn Yum of to Wat, Joey? China. Joey Now

Joey Wat

everyone, proud I'm growth solid sales us of on thank to in you in top share grew the Hello, for a joining turned quarter. System year. first year-over-year performance we today. and X% last that XX%

Our quarter, the X XX operating an profit high since year. quarter revenue operating of XXX year USD last $XXX all-time in the from base million Adjusted the billion improved to Core million profit in high. highest last spin-off. USD in of was X reached quarters a our

the again once changing business and demonstrated results. our model to was these results and environment resilient our work. and in ability We We conditions quarter second This achieved solid adjust competitive team's highest. to a challenging deliver thanks and our hard to agility

time, share totaling and surpassed stores. shareholders record reached accelerate cash record invest of to a million. the At we USD stores. repurchases of through amount a and to our of continued milestone dividends We returned to XX,XXX cash XXX number the same adding We growth,

we portfolio. In by space quarter We We store in strategy. China. to intend Let the passed XX,XXX offering white fill see have for new X,XXX X, to opening XXX net in years us market bullish stores. It accelerate. store opening to X,XXX build I X us on last start the China, years with our X,XXX expanding X build years We able took been just and for to first the the stores milestone, store stores China the stores. of remain our as how proud years to next me am we XX come.

Tier hundreds are well [ developments XXXX. Contrary stores residential select commercial and a X,XXX continues way in and ] for potential shopping particularly and year. courses malls, us. to Tremendous China present our another consumption yet more reports, ] opportunity affordable upgrades with consumption cities to X to long-term We of on complexes there. rhythm to develop by below has and unleashed. attractive new Housing Urbanization every living opening be [ rapidly are

new stores this or such our new XX% strategic roughly expect to be locations. We transportation as locations of cities in year and tourist

models every each Our franchise store capitalize the these. a give partnerships of us to and look at opportunity. flexible Taking closer tools on

in smaller further as equipment just we and expansion. penetrate X/X In with million. has were Hut CapEx formats. are X.X can has average, always for store innovating X.X RMB CapEx new Our mini across store potential enable store now a us million takes tiers pushing expand per to flexible for get recently further. store cities, X.X for to even new model CapEx formats. KFC quarter billion just city On build stores low and and lower-tier menu lower holds store our RMB simplified as X, of RMB and a to time new developed optimized significant small X,XXX openings and Pizza models

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provinces, opening more are centers car in over stores highway service We at presented rising ownership. on by the opportunity XX capitalizing the

through Some franchising. will of stores our be opened

approach accelerated X estimated consistent remained -- franchising. to from has reached to In Pizza ensure locations. new for fact, other partnering In At with next disciplined remote A areas our opportunities the KFC. We year, tiers, to at years and mix Investor ] of in X, our this stores open have last high-quality for in our XX% X quarter X KPIs strategic improved closely years KFC years X X at will Hut. stores. [ net vets come these very franchisees track help we we unlocking to XX% expansion. Payback from is about periods and key XX% Day new lower years

on some brand spend strategy. our now time Let's

We It diverse options, affordable recorded make an everyone. we have food. not sure we something meet there's over for XXX quarter demands We easy. the with representing our million built Through China. XX% them. delicious increase in We a and premium taste alone, strategies was first satisfy year-over-year. customers' robust bond innovative transactions of with in devised to emotional And buds a combination

other and year. to allow shares. offerings. also our year growth there While price lower that orders, successful a The strong opening last points customers us restaurants our capture expanding strategy well and market were holiday our this But lot more will more to reflects our open the transaction our spread remained into during to respond restaurants this ticket year,

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premium options have both to we value So consumer diverse needs. meet and

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are share operating without shops segment this dining coffee ambiance additional coming. coffee end, ] equipment, are K-Coffee excited this correlates a [ [Foreign is connected Using We a a To can aroma. products costs penetrating cafe surrounded so coffee These we a by sparkling in and Language] serve it unique It's side-by-side to [ area developed of further floats about can coffee KFC and coffee, investment distinct mode. have market. [Foreign call we storefront shedding growing to kitchen Language]. investment down. stores, like that KFC keep equipment. Summer we the and ], We

coffee already, our coffee. XX we best-selling intend indeed refreshing cities very to So already. this We XXX friends out of we across success and sparkling to our one [ It's side-by-side encourage ] really model of try ramp see initial this aggressively. stores

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delivering Our points, new strategy and consumers. into value price to widening emotional emphasizes categories expanding

pizza are in quarter points. entry RMB double We our X. XX widening grew digit First, Sales price from we below pieces enriched price offerings.

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person X also share expanding to meal our offerings growing are of capture We occasions.

X,XXX we week, ingredients. freshly Dough the daily in Chinese inspiration on Burger stores actually Pizza baked existing basis. PizzaBao buns, a burger last dough the This to ] from made The all Just with in-store features [ bun. comes launched pizza around

we of collaborations with to our games. the is to So These good. and fun. sales. animation that is our different. confident complements The And incremental customers young juicy In food. aim top attract our eager a delicious beef patties. to We and perfectly of emotional customers it's are more It fluffy, bun very unique dough pizza doubled very offer wave the quarter it's and will result chewy beyond chicken campaigns value IP number and join than we unlock

turn store We in Lavazza. and small ] improved synergies. engines, making Lavazza's to driving coffee store reduced progress of Let's the [ and further growth are shop our steel latest good formats economics. retail CapEx

Five Our X brand growing retail such are Michelin as star businesses, we premium to China. and Lavazza By the building business Star Hotels in expanded outlets restaurants. the

for are competitive [ Looking more fresher smoother forward, operations. Group, and roaster ] Lavazza with a partner to local beans, planning cost and we

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internationally, also U.S. are in new as reentering store a expanding the Jersey. with Little We New Sheep such

launched our we Project more are fresh the philosophy. or to eyes In our efficiency to the of We our serve customers restaurant capture #X more general we and expand assess resilient. #X to As of business through RGM operational incremental processes Eye greater Fresh pursuing make even RGM. traffic, our manager spirit operational

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regions efficiency. role driving We continue are play to promote in integrating to big functions. Technology and will across processes resources and synergies streamlining a

generated use to to processes. develop marketing recruiting creative starting our are facilitate We AI and

develop targeted on be and we We savings addition, the in best opportunities aim and to industry to cost, strategies. other to stakeholders. any identify and customers passing In benchmark against cost of areas best-in-class our

ability ever-evolving and us emotionally them to with consumers' to Our allows address needs continually. connect our

proprietary supply on pioneer our that, capabilities us us and competition chain Our I management apart a qualities call operational the market. With us digital and this in sustainable for These over massive help this from turn scale. do to efficiency dynamic Andy. to set unmatched enabled growth will drive Andy?

Ka Yeung

We higher hello, solid Thank growth base. [ first quarter, ] a EPS everyone. despite in delivered you, cooperating the sales, driving profit Joey, and results and

long-term operational the and took our expand on efficiency time, cost same to driving an growth. At we support actions offering structure rebasing, addressable quarter, our During pressing first strategic market. to with action exciting are packed we the sustainable launched both

at year. Let's than performance were XX% X% stores ticket fourth X% levels higher new strong net contribution. perspective, at by net very year-over-year, detail. year-over-year, RMB X% quarter increased is XX portfolio than holiday traffic the year first due in XX,XXX a new performance first KFC's XX% adding sales in This by XX and driven now quarter against the high also Same-store our reached the store X% led with was a look By unit increased year XXXX. at net levels, it new brand, stores, to system sales sales prior sales this of higher in growth Same-store And average. Putting year were more low last ticket quarter X% of XXX quarter. contribution. System in into is sequentially XX. quarter in KFC impact. last the same-store RMB RMB average our

ticket with enriching higher Now drive like chicken traffic, combo. strategy beef products average our burger whole in and offer line to while we incremental entry-level

increased with [ had by our lower vendor capture which stores year sales X% smaller XX% lowered X,XXX a the strong reached prior we XX% sales to ticket and X% ticket and level, portfolio first a of driven net year-over-year Hut's ice We at by average. Pizza rebound Pizza also of led ] And nice breakfast, in record ticket stores Same-store cream quarter contribution. average. XXX. system unit fees traffic new growth coffee have orders. of Hut's sales, lower a net new were

our we locations, million. Hut size Joey tap specifically mentioned, Pizza capturing at out smaller was and $XXX meals customer party This entry are As priced take incremental person Hut. enriching options helps more underserved one into pizza, profit to segments Pizza traffic. Operating and roll

as XX.X%. We're of Our core last very was by operating performance the that was margin a year. percentage not of also X% only profit strong revenue our but operating on stable delighted top grew

items items reminder, impact, a exchange operating core profit comparability. and other special As excludes foreign affecting

low Our restaurant proactive margin. the savings offset in G&A expenses year-over-year partially

can we we Joey drive high to have for growth. sustainable that so mentioned, challenged ourselves As strive efficiency

cost items. through go key our let's and restaurant margins Now

was staff value was than of comparable and money sales year-over-year basis cost from efficiency XXX other superb us offerings. on higher while and due Project to costs, XXX The higher Favorable difference Eye basis We mainly comparable year XXX the pass procurement increased XX.X%, restaurant for back was points lower last allow gains points basis improve. Total cost our higher Fresh XXX Our savings on and basis. costs of wage This XX due to points lower or occupancy XX.X%, higher customers. Cost to for XX year-over-year, year's margin to rider or basis improved continued a a frontline basis. commodity points flavor sales expenses. higher mix lower productivity, which went higher as year-over-year well improvement mainly marketing labor basis. our the or comparable a on offset impact. Occupancy basis a lower leveraging other labor on costs delivery and lower as This year-over-year sales of than points more basis and as XX.X%, increases expenses points comparable advertising last up. We was from points lower basis to XX.X%, basis. came XX XX the points and was basis or rent was

a sales. because Our across ratio year, and G&A year. G&A would with But year a year-over-year as aim compensation XX% performance-based of fluctuate Obviously, was ratio gains revenue the seasonality percentage improving be expenses X.X% this full for organization operational around we efficiency of decreased in ago. to in quarter, expenses keep lower X.X% to from the G&A the X%.

to rate on the year-over-year due rate first quarter. lower The Our less expenses. was basis effective in tax was XX.X% a tax mainly nontax deductible

high the expect rate XXs. EPS effective XX% be We tax to $X.XX, year Diluted growing in was the full year-over-year.

outlook. our Moving on to second quarter

quarter sales As a reminder, the XX% the second quarter of last year all was profit a the year-on-year phenomenal increased second quarter. quarters. was last year. among second Operating System last year in highest

from VAT last $XX around We deduction in recur We around which year. Children's demand Day this expected not to benefit, holidays Labor and also million Day recorded strong benefited is year. temporary relief and

again was for base this a all So from high comparison.

strategy choppy. their Consumers but of on exciting with great rational to drive our our to indeed this will the for expect new offerings. spending remain execute and adapt, ahead we'll the are offerings This traffic do tide continue money more Looking our campaigns. value to quarter well second in year, in test to normal, they ability respond to the to we incremental

continue On side, the hard across the customers. the we to operational the organization improve savings along work to to and efficiency pass will

strong stores. For expecting X,XXX the to we full with are store to X,XXX open net a new pipeline, year,

growth, first million record more also which XX.X quarter, we X% for $XXX investing In shares, to to back shareholders outstanding. is of million in to equivalent share the addition our returned buying than a including

cash cash. billion had flow of generation net in At and end are $X.X possible. this position cash made quarter, the healthy strong what Our we the a

drive Florence. and pass back continue that, to will billion are to $X.X it growth. With to We long-term sustainable I to shareholders Florence? in return our XXXX committed

Florence Lip

Thanks, Andy.

for Q&A. will we the questions. [Operator open Now Operator, the call Instructions] please start

Operator

Goldman Instructions] from Sachs. question today from comes first [Operator The Michelle Cheng

Michelle Cheng

Congrats is on sales results My for and question tough still the the a comp. resilient very about very trend. consumption same-store

but ], we tough like KFC performance there ], holiday or and just are share pretty Chinese strong on expect sales? And been parks comp especially has year. growth by size [ -- healthy. bad you Day hub transportation I'm you including color offline second and is very a more into we ticket day about color different can the sales, trend And holiday share like TC any consumer double-digit items the should wondering still post higher and you Labor on at also month-to-date a TA Given still is the we [ whether traffic year-to-date, And had versus pretty know same-store last XX%. cohorts how mentioned that we quarter even? going had

same-store look we at quarter sales. how wondering should second the So

Joey Wat

little you, seeing to Year a and Michelle. right go what Chinese bit we recap then Thank New through quarter I now. the of the would are

the on was there's New was we earnings ]. on So the as well transaction with base. call very we a And the anticipate tough the led -- total system growth on unique growth, also, X% are very peers. prepared from time, demand then transaction top Chinese the last XX% of year pent-up sales -- And the a more with store encouraging. mentioned growth And year's Year we openings traveling of quarter our because high X with it and and reopening yet, with XX% robust store delivered release bit and we leading new that's growth then quarter situation see the by X. growth [ The last mainly building last -- than

I return normal and the Trading And stores prepared in mentioned et Chinese hub, see we was the XXXX business with New robust remarks. trading which more see the cetera, booming. then transportation the For diverse consumer. to was we Year, for demand, also my available

items, average needs lower time, is On cetera. very the of recovery like that's all and for smaller at but cream, a et money from to the breakfast, value equally the with the hand, for delivery items ticket coffee, the the appreciated same high-ticket way customer ticket the one ice strong functional

are also So continue to see then the of trend we trend during good. And all -- holidays. consumer these behavior see the

Eastern X belt little improved. And regions then, the And all city X grew mentioned best have sales. By a region, still then before, switch performed continue and recovered recovery before. about the the et holidays, of last course, was brilliant. bit. lapping cetera. as part on see strong, North in during such they resilient, as best a across which the tier, of well there China regional tier to the the city living as the We holidays, lower China a Tier X are I Eastern year. that system continue lapping So if Tier is trend, next really the the tier, few it's cities the year cetera, move to base and after they sequentially lower we very in do tighten And up mentioned times price et we regional with from again, prepared hubs because lower. then and city China, location, But the trending March the ], Tianjin remarks, because, the Tier the to be housing costs In [

is shopping building China. And many coming And can more by can We that's that very so we is by the the level KFC -- massive. driven So mall because the well. mall but malls. consistent do to XX%, malls we that growth a quarter not well, And will worked was we delivery where don't countries decade it robust, at that have have are X,XXX last is again comments X. earnings to in malls shopping going I and the in about which increased mentioned And is China also is shopping and XXXX business. delivery, surpassed the Andy continue. well. few actually X, it's still our quarter release, -- trading delivery as about for I are at and sales to the the strategy which estimate continues trading that you XXXX, think trend few see, a to stores more location, is which Yes. sales And smaller for And that previous make our that really shopping delivery actually very XXX it's year hundred is of shopping the XX% to very that reported order encouraging quarter robust, this a think a good. By have of tracking. one about and many other trend part something base

Ka Yeung

Michelle, Thanks, questions. for the

again, for value really as we think I quarter committed delivering to compelling to So we X, work And are we mentioned, share consumers. well.

and engaging drive more introduce will execute to more products try sales. some marketing to We campaign then

continue see consumers prepared their some in our have mentioned our introductions, propositions respond fund more also new As to well. product but campaign rational in remarks, to and we spending, value we to they our do marketing be positively as of

year, increase do year sales Day we're what quarter XX% just in more. And system also have profit year, high very for which sales. have during some we to in strong year. was seen going Labor and terms performance actually So the quarter a holiday remind second everyone, of last and record the a last this we Day base helped that's like Last our very in Children's by then a

had which As million last we we're year, $XX about that well this some occur to expecting as not onetime year. also

we But our consumers. plan the campaigns, And [ that around can a prepared then strategy, further we it intend fluctuate Fresh keep to so year, all, efficiency. to X%. our welcomed that for we do we we continue these as high to pass improve values, savings will remarks, in our on full mentioned expenses. Obviously, find will base. to many our both mentioned, ] challenges on quarter-by-quarter to the customer. we to all But despite ] mentioned, the in we more focus a again, Eye would ratio. also try and G&A that And [ So product the we we Project introduction And we have have new have

change keeping I our things the this is that small in mix changing the so is yes, new of franchise which exchange. the also So sort we the store foreign mind. mention that contributions, couple versus fees is also want as company of is store and a would worth One to right, franchise increase And store, sales. mix between is there. But structure of plan revenue

operating Our our currency RMB, U.S. is foreign is currency and dollar.

will exchange currency to the be fluctuation. continue we impacted So by

Operator

The Oppenheimer. Brian next from comes question from Bittner

Brian Bittner

competitive relates promotional is I it the your time, a to operating pressure realize also you which As it environment, I and think of driving average very the at traffic is a lot environment, same But it's the helping to drive growth. check.

the unpack it up Your to which average you traffic the coming from the Can do impressive. loyalty to how your frequency customers? And expect long I'm it you is in more customers? average Is check where quarter, where sales? And to be headwind from? from is same-store curious a was traffic declines, same-store coming new as X% growth this is traffic check it from? coming is Or existing Andy, relates Just customers?

Ka Yeung

So I will take these questions.

specific I is First the our incremental goal, drive real ticket store. to which well aligns out average like traffic with of all, to overall would that to point our

seen have things As growth, transaction and KFC our demonstrate which is of our we business. impressive you the strength Pizza mentioned, of Hut, and working pretty that strategy both at

KFC and you Pizza we Hut, in X% same-store for If experienced look at X%. traffic example, increase a

So that's good.

including the mix by to TA, mix comparisons, important about at talk a influenced and mix, in ticket post-COVID recovery. we factors of look size order average, for when product the also very it's Now yearly us delivery the are

provide our clear look trends on trends long-term the to worthwhile longer at strategy there. will I perspective -- it -- however, think a So because it's

XX quarter, the a impact first XXXX. RMB obviously. they XX for KFC that than TA RMB in example, quarter higher the -- due RMB Is overall is healthy. With the was very in from the sequential how also increase the quarter to in XX For fourth

are like And approach over balanced the we committed to manage at long a term. through KFC so again, TA the

promotional on Our customer introducing strategy and new demand. products has meet money, launching for also campaigns to been value focusing

breakfast, have rates items Now whole and burger have the do sales -- the small-ticket high-ticket pandemic beef quarter. at our capture after size we to coffee order. in have the same strong rebound well time, we delivery as we more definitely ice we delivery mentioned double-digit see cream also At reduced reopening, before. mentioned the to like also sales And in going items some our also chicken, the continued in fees

enhance balanced So market well approach, positions our and also this is customer reach. to us expand value a then

to Now as continued Hut on beyond Pizza X,XXX side, its network grow the brand stores.

more from business market transforming a premium We into business a remarkably mass operation. are casual dining the

we our pricing at So our realigning positioning with Hut. are market Pizza

have expanded product We more other and our price RMB both mix, also below range items and pieces XX. offering

We consumers, launched providing Pizza are smaller for burger, more more making for also suitable such as party products Hut our options recently size.

should think, to I approach, us this addressable Now help our expand market segment.

glad are driving We in quarter. [ to strategy the successful has transaction our in been see pricing strategic ] that full growth

focusing the driving average margins. So profits the -- are we and sales Hut, while at but lower ticket Pizza our remains focus incremental and same: driving

Joey Wat

are both our mean ] big. captioned Pizza [ very business I

find highlight things in category show or helpful to to one growth. the the maybe just it I So two

it big, to is Although big. not when that translates might it because our be base total number,

said, a brilliant. it's cups XX%. number, our I other grew you coffee, number of show it K-Coffee, So not example, KFC, an coffee by does coffee big for in it just Brian, than business give for to actually of what mean but Andy

release. And sold the we have about cups I only So as alone, million quarter now. of growth. category. XX we pizza earlier, right the One in very intend earning is below previous something we which XX. that to we Hut. store priced quarter so promising mentioned highlight for The XXX grow Pizza is And or price aggressively. And coffee X side-by-side RMB Brilliant, pizza, here mentioned XX% lower the it very

to the we, is course, the RMB XX it's and Hut. Well, now. TC of lower And pizzas point. -- in sales price double-digit of for category We better. this you than question that price us even group asked, have this of at gave which more X launch Pizza It for growth choices course, growth, small the intend

So you on how sense a of that are growth. gives focused transactional we driving the

Operator

comes next from Luo question The BofA. Chen from

Chen Luo

on side. My competition question the is

concern. a in always has quarters, competition So X key past been investor the

intensity promotional has that So in months, we also increased. the noticed few our recent

based So with intensified earnings do last actually or think our largely at we observation, competition further the has on still moment? our compared stable call,

Joey Wat

been Well, honestly, has always competition very throughout decades. intense

then of to was to much will XXXX, the again their We grow good just reported although the barely and competitors and want in and or XX%, highlight the the I the a year grow X% competitors. the is. investment evolve game very the But growth faster year, increase GDP industry actually grew number, like in whatever growth or before industry. Last And continue at industry to media. XXXX, up it with double and at learn our see than that the again year, or nice this digit mass GDP always the for it's

it international invest domestic investors to naturally, continue industry. both attracts So to and this in

So really all. best the thing it's at not

is that. learned with that I ] will you and compete open the what's the competitors lower-priced [ okay. market, what category, in here think pizza. years, Chinese in burger, important on doing, we other and remain to quite who market that's from learned choppy, to to to how we in agile. And continue learned always have And of we from the in and exactly we players whole have stay chicken. we'll and been can minded pizza be We about the And our players local that's reconnect launched relearn continue possibility the other And we focus this but is from last do we what few see we'll continue consumer. that's -- the

compete. ] here then always to is KFC. our whole our is our consistent, and have the Hut, that et item, relatively The chicken, then the to long or for beef such by we for to consistent stay, having it sure Pizza again, burger very is XXX. term, continue And as was and is average strategy are TA drive down XXXX, product We pick cetera. And to ability entry test average to ticket the grow the transaction make stable our about priced in and [ ticket will high TA it's very actually.

TC has to drive down We'll it consistent growth mass-market our store Now to strategy. continue it's with XX. TA that because strategy be

stable sort of the have and compete market. we'll strategy in So to the this consistent

Operator

Morgan from from comes Stanley. question The Lou next Lillian

Lillian Lou

commented Joey been we at widening best given -- demand is as worse stores locations. actually in the there are performing different between about or I effect. so-called stores, store seeing that right from some more situation, stores the on performing and consumer well, holiday have diversified a now, performance And there relatively gap question has

example, terms hubs, underlying the traffic debt performance. store deliver to course, we efficiency an mean, better I continue so to For of in bigger reacting of more heavy cost that, savings. and the of And

or understand from [ demand, keep challenge or we to trying self-performance multi manage, how site So of more. better saving ] customer this

little bit think sit Joey ] saving you I understanding ongoing trying to a the Andy there bit little about cost mentioned [ better a for and progress.

Joey Wat

sort or language all, holiday. Well, the belt the during Consumer years holiday after U.K. first more are that like in report despite consumption of demand that That exactly I the the would small splurge for not a bit cultural the they difference. -- between of spent the tightening the unique. I diverse difference to and XX is same the

better. and better business our train to learn just we So

the is holiday, So how the the of meet same transportation focused beef is Chinese do high But do very customers and like chicken, bucket it? great we we splurge. burger, deal diverse so New trading, we whole -- the Year the still big Tier lower drive our ticket time, actually TC, How on high-ticket also customer is location. can that demand? During very in tier the functional. the we But location like at city with it's splurge and China X And city, will example. The a country. hub where a the tourist

investment, will further probably -- see accelerate the The mini opening can it remarks, we're see RMB like what to strategy, store are we our is in about forward, our location mini million. store very and prepared at in you and what's -- going very, hub opening deliver all. And And store then and trend then in earlier And want. and I X.X strategic model. continue the it's going being transportation good judgmental these to terms and also store accelerate of just tourist we the location very not low-cost mentioned in what match customers model models. So the [ we the

investment normal to million RMB RMB X.X Our about is billion X.X now.

investment with model very and smallest cities we the that's more the the million, see it's city low-tier we tested, happy low low-tier to customers forecasting more because And going is strategic because also now. good ]. RMB X.X are location are for is the that the and good [ for that's we So and very right and

rent we agile, mini helps. again, works. And return delivering menu And has my half many mentioned menu And I to this of model, monitor the we that that remarks, years. might X years for lower. X be it, years, to not efficiency very then of here, to make guys you quarter, the Pizza respond And mini only the and specific operating labor, is X costs, of Hut, in I that course, store it we to enough. are store the within be is to realize and new So to very in fast. And hope After Therefore, KFC. normal clear the of the work, work. cost including it particular it model certainly prepared the changed

X Hut remember, when than improved which quarter years, quarter, Hut we to to the to Pizza Then to this we of is more finally start X opening, X So payback X you XXXX X years. as new has if store is Pizza years. brilliant. years, X, And time X improved the

say, also we ] We of cost want kind are new Lilian." we So the thank flexible line, this location it value also means but you, payback can is efficiency. to the pay [ in "Oh, more strategic by that and through with line store better that better open go store

Operator

The next question comes from Anne from Jefferies. Ling

Kin Shun Ling

because or is items, higher cost sure goods packaging this promotions the offering, delivery a noticed are increase then of is the there in COS? that terms also just it of cost cost, So whether the charging higher whether costs. And because for example, of the in I'm like in this some regarding X the is there's of promotional reflected and RMB some not it food RMB sold, that I'm are the cost lowering are we we of that X results also the new with actually we well. goods wondering cost. as side, Or

with chicken price, the food XX%. it look you maybe year-to-date, So share the that us if of the at given outlook was actually what we the down fact cost, is can

that chance front? we So that any see savings will on some

Ka Yeung

you thank for your And questions.

quarter the cost of when XX.X%. what it's have, sales, minus like a at X% So we we plus look about around Around first range. what we're talking

you on is obviously, are the as KFC traffic, transaction both store brands we prepared bit in actually In driving driving have fact, is And on within focusing if and Pizza a higher. little that mentioned remarks, both look at growth store. the Hut

we so stepped campaigns. have And money up for value

We new introductions also and other have product promotional activities.

for growth So system sales the X% the of good. is overall seen result company. We've

And supply commodity Now or in there. favorable of prices, poultry, quarter. quarter favorable commodity contracts prices in ahead lock also we have the We we of price do so time. commodity terms have a up do for the our

So we also would know prices that second as in quarter, have probably well. the commodity variable we

because cycle chicken chicken life almost quarter. a about the the life However, or is raising cycle like

we so cannot a longer-term sort provide And outlook you. for of

the do have. to we good favorable from pass of get they we that the so commodity that whatnot, -- prices consumer, mentioned got terms to gains that back have those we that intend can value savings before, the the they commodity and Now as in

obviously, higher quarter sales is day little bit Now cost and great demand. -- All-you-can-eat for which both it as a we'll supply efficient run time, continue over well. the a it's by And All-you-can-eat growth the consumer drive for and Pizza is calibrate they campaign, there. sales profit over can the and protect more of [ drive that higher Hut bit ] so make because did to we but chain

Joey Wat

And comment. one last

sales KFC has reduction that. the offset XX-plus fee of the margin on [ have we in ] growth rather to the impact So the minimal delivery because in delivery

know we it, be test okay. we before it's course, okay. and we to it's it of And going So launch

Operator

next comes from Wang The from question Ethan CLSA.

Yushen Wang

So delivery services. on the my is question

So the was first but well. it might concern pretty post-COVID, some delivery in sales there the go held down, quarter, that contribution actually up

going that cooperating off-line a that affect we we and dining? And So now management our trend seen that in expense one is case, going delivery are on has cities, because platforms. to that sales with is resilient forward? And [indiscernible] salary more planning some mentioned any in than --

planning how should So is How help? in terms Is that cost to think about deliberate of kind controlling? we this? a that going of

Joey Wat

of delivery question, in I and the percent continued last terms as in In of to mentioned improve as the XX previous increase it has sales, a years.

driven. to then KFC And store going store emerged from is dining. delivery have percent So XX% about is is becomes the store in our reflect become And too. is as And XXs, of right? Because the delivery we smaller, the the focused. and not more course, trend now takeaway from Hut, it Pizza that, Same that Hut, Pizza about right away. very is satellite XX-plus and portfolio business, for our delivery delivery high

and to sales So size notice forward. there business very they ticket in are that average and traditionally two probably Pizza historically, KFC like our delivery you business we Hut things going is grow. And for delivery delivery the of high to because for are will that our and both order slightly will going too high. smaller continue for I the would mention One is

smaller the the delivery last to grow tested make we high for when is customer X why? Because to X KFC, we this choice in and hard encourage smaller. and it year, So year delivery out too order have the a order the fee, when business. And reduced for to roll quarter the delivery quarter size in it's fees

So it will.

to then have continue bit a choice we'll work meal it. And to we to to because Hut So make do first enough have have X-person that Pizza more do happen.

a more at even way look well, it So in here. that's positive opportunity

lower incurs opportunity price that So that smaller order. helps the is ticket because one

burger It's Pizza of you try is Hut until you unique. bun the hard to a is pizza border unique it try the the is China, it. goal then by burger The juicy, pizza is encourage very different. if really and which, to Pizza pizza love it. The one and way, as business, -- well. from love will one And you're the I is, more I we burger very the just cross you It's Hut in bread well, the KFC. love make I know pizza very from is Second -- the exciting. that launched dough. -- I KFC describe is how made

other more than freshly X-person it's the average meal great the size in is a person. one And that than store. baked because for very itself unique And beef is So Hut alone it's product, ticket and is Pizza brilliant. the

with delivery bit the for both to business. years delivery platform rider, of quality. quite do And of on order for the are own guys using have thing you rider will continue the to So comes our a we it know to that we that, and because and insist years, right to grow the some there. When the margin smaller of

that. Although know it's slightly higher cost, we

has time changed. However,

We select know the case. the rider, that sit, is test we good. is platform some very it, we have locations, when quality In that that so again and learned

happy good. this year, So robust, high, we it and is sure in Chinese with the them the last quarter to demand is still test. X Why have then demand we in test is And this we this very Year. important? Because quarter test is and is X New make even the quality continue to we year. when are very When the

manage continue the that they Pizza margin. And affordable, KFC, it delivery so more in started But then rider to we that as are out the good. on mix Hut, not practice for business platform yet. the roll So we'll locations the condition is have quality select helps

will So something that to followed. be be

So Thank I Ethan. will pause much, here. you so

Yushen Wang

Sorry, I time. know we're of out running

locations, selected they [indiscernible] are high-tier mentioned we currently when cities, So

Joey Wat

we Sorry, not quality. Select evaluate based hear on location? could It's Research, the everywhere. you. I

high So low [indiscernible] it tier city or could be

Operator

Capital comes Corporation The Ling Sijie from from next International Limited. China question

Sijie Lin

Congrats for another base. solid quarter results under challenging a

So have K-Coffee. I on the one question

the current happy that we future development strategy store pricing, and add the our design, the our XXX We could in the bit positioning to and independent store format, you like stores expansion? we short time. store main just the similarities location, give about are And What's So What's regarding how plan very side-by-side the a have see can K-Coffee of place K-Coffee? a cetera. compared already more with players? so-called the et differences And full for coffee own the advantages? menu to or

Joey Wat

K-Coffee the find quickly. all some of these you if to out very come figure side-by-side think is store, you to our I out of way then best

of a the quarter X, K-Coffee, let So for is the again, number. mentioned me the I'll number very significant for cups -- which increased XX%

support. very So for we customers' are grateful our

XXX now, right K-Coffee stores side by have we side. So

lot through results, a Even with detail. Let's structure profitable make coffee, the of price for our RMB cost result is then are we start at these of we'll additions. go ] all work. The X.X the [

So impact on worry as margin. to have our about the shareholders the overall don't

store coffee So the what the despite this space but aroma. for K-Coffee we And The is also way space. coffee very KFC defines sell dedicated see it versus all we K-Coffee having customers. in the was fried is stores, -- need for the a lovely chicken It's lovely a the store the and store? smell

at space stores many that to so will is and opened of create small these we we Because of now because we is advantage incremental that it a KFC, every so and cities. development, have we top-tier took right So you very next see year, side-by-side and store storefronts. K-Coffee. cost the X One new more cities K-Coffee in lower-tier

share here And we kitchen. the the is trick

actually So within CapEx incremental kitchen. our you kitchen. there's portion investment the in investment, no that the biggest the know is And of

very coffee helps. is affordable. And unique, has it though. the So we the other that is menu to -- similar in saw then something The KFC stores, what pricing

is this of to now. shop, K-Coffee But gigantic also The our portion hundreds we come that sell you right a make to try if big our sell. We So and brilliant year. our Language]. a sell of [Foreign K-Coffee million millions gigantic sure [indiscernible]. It's you realized [indiscernible] every [indiscernible],

have to our mentioned for see side-by-side by end the as strategy aggressive. very prepared in what the And be remarks, do the would shop year? shop, with the unique and XXXX is of growth product of I do we K-Coffee that. again, we'll some So K-Coffee aggressive? You'll And continue

Operator

today's any now for hand Florence does back That the Q&A Lip conclude conference I remarks. session. to will closing

Florence Lip

you Thank [indiscernible]. for you, today. Thank you. Thank call the joining

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

Joey Wat

much. you very Thank

Ka Yeung

Thank you.

Joey Wat

Thank you.

Yum China (YUMC) 30 Apr 242024 Q1 Earnings call transcript