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    2. Yum China extends solid gains following robust Q1 earnings

      2019-05-01 09:16:52 GMT2019-05-01 17:16:52(Beijing Time) Xinhua English

      NEW YORK, April 30 (Xinhua) -- Shares of Yum China Holdings kept going up throughout Tuesday's trading sessions to notch an upswing of 6.23 percent shortly after the closing bell, as investors digested the Chinese restaurant company's strong first-quarter earnings released Monday after market close.

      The company's stock price rose to 47.54 U.S. dollars per share at around 4 p.m. EST (2000 GMT), up nearly 2.8 dollars from that of the previous day.

      The increase marked the biggest among those of the nine advancers in the top 10 stocks by weight in the S&P U.S. Listed China 50 index on Tuesday, including JD.com and New Oriental Education & Technology Group.

      The benchmark index tracks the performance of the 50 largest Chinese companies listed on U.S. exchanges by total market cap. As of Tuesday, Yum China's market cap stood at more than 18 billion dollars.

      The quarterly earnings also turned Bank of America Merrill Lynch to upgrade the restaurant operator's stock to "Buy" from "Neutral," with a price target sharply raised from 43.70 dollars to 50.80 dollars, according to local media.

      For the first quarter (Q1), Yum China's total revenue rose 10 percent year on-year to 2.3 billion dollars, excluding foreign currency translation (F/X), while its adjusted diluted earnings per share (EPS) climbed 11 percent to 0.59 dollar, said the company's latest quarterly report.

      The upbeat results were basically boosted by a 9 percent increase in the company's total system sales, with a growth of 11 percent at KFC and 3 percent at Pizza Hut, which are key pillars of the operator's businesses.

      The sales leap marks a tenth winning streak since the company's spin-off from Yum! Brands in 2016, after which Yum China became an independent publicly traded company listed on the New York Stock Exchange on Nov. 1, 2016.

      Now it has the exclusive right to operate and sub-license the KFC, Pizza Hut and Taco Bell brands in China. It also owns the East Dawning and Little Sheep concepts, as well as the controlling interest in the holding company of Daojia com.cn.

      "This resilient growth was driven by another robust quarter at KFC, which successfully lapped three strong first quarters between 2016 and 2018, and a very encouraging quarter at Pizza Hut," said Joey Wat, CEO of Yum China.

      For the first quarter, Same-Store Sales edged higher by 4 percent year-on-year, with KFC rising 5 percent and Pizza Hut up 3 percent, which were mainly driven by Yum China's digital and delivery capabilities, said Wat.

      Digital payments, accounting for 87 percent of the company's sales, ticked up 13 percentage points year-on-year, while delivery, contributing 19 percent of the company's sales, increased by 3 percentage points for the first quarter.

      As of the first quarter, Yum China offers delivery services in 1,160 cities, up from 972 cities in the same period last year.

      Restaurant margin in aggregate also went up by 18.5 percent, compared with 17.9 percent in the prior year period.

      "We achieved a 9 percent increase in adjusted operating profit during the first quarter, excluding special items and F/X, as sales leverage at KFC and a notable improvement in Pizza Hut's margin offset cost inflation and increased promotions," said Jacky Lo, CFO of Yum China.

      During the first quarter, the leading Chinese restaurant business witnessed an impressive expansion pace, with 237 new restaurants set up, led by an acceleration of KFC openings, lifting its total store count to 8,653 across more than 1,300 cities in China.

      Underpinning the expansion are the over 175 million members in the KFC loyalty program and over 55 million members in the Pizza Hut loyalty program as of March 31, an increase of 50 million and 15 million, respectively, from a year earlier.

      The company sounded an optimistic note for its 2019 guidance, and expressed confidence in its expansion rate as well as long-term growth for the year.

      "Looking ahead, based on our current pipeline, we are confident that our 2019 gross new openings will exceed the top end of our original target of 600 to 650 stores," said Lo.

      "While we expect poultry inflation to weigh on margins for the rest of the year, and Pizza Hut's revitalization program is still ongoing, the long-term outlook for growth remains positive," the CFO noted.

       

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