Daily Coffee Report 8/6/26
Daily coffee report
StoneX Coffee Team
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Yum China Reports Third Quarter 2021 Results
By: Alexis Rubinstein, Managing Editor - Coffee Network
Yum China Reports Third Quarter 2021 Results
CoffeeNetwork (New York) - Yum China Holdings, Inc. (NYSE: YUMC and HKEX: 9987) today reported unaudited results for the third quarter ended September 30, 2021.
Impact of COVID-19 Outbreak and Mitigation Efforts
As described in the business update released on September 14, 2021, third quarter results were significantly impacted by the Delta variant outbreak that started in late July. This regional outbreak was the most widely spread wave since the first quarter of 2020. Several major cities were locked down, including Nanjing and Yangzhou, which are key cities for us in eastern China. Zhengzhou and Wuhan, the capital cities of Henan and Hubei provinces, respectively, were also significantly affected. In mid-September, there were also smaller regional outbreaks in Fujian and Heilongjiang provinces, in southeastern and northeastern China, respectively. Strict public health measures were implemented across the country, including the closure of many tourist locations. These actions led to fewer social activities, substantially lower travel volume, and cancelled holiday trips. According to government statistics, the restaurant industry in China was considerably impacted in August with a revenue decline of approximately 10% compared to August 2019. Despite a mild recovery, the restaurant industry's revenue growth of approximately 2% in September compared to 2019 was the slowest since March 2021.
Going into the fourth quarter, strict public health measures remain in effect nationwide. The effects of COVID-19 persist, such as fewer social activities, cautious consumer spending and subdued travel volume. According to government statistics, for the seven-day National Day holiday that started on October 1, the number of travelers was down 2% compared to the same period last year and down 30% versus the corresponding period in 2019. Related travel spending was down 5% compared to 2020 and 40% compared to 2019. With latest regional outbreaks resurging across 12 provinces and rigorous preventative health measures in force across the country, we continue to expect same-store sales recovery to take time. Same-store sales are gradually recovering but remain below the prior year and pre-COVID 2019 levels, since overall dine-in volume as well as traffic at transportation hubs are still significantly impacted. We are focused on driving sales by leveraging our member base and digital channels, launching great food for both dine-in and home consumption and enhancing our hybrid delivery model.
Third Quarter Highlights
- Total revenues increased 9% year over year to $2.55 billion from $2.35 billion (a 2% increase excluding foreign currency translation ("F/X")).
- Total system sales increased 1% year over year, with increases of 1% at both KFC and Pizza Hut, excluding F/X.
- Same-store sales decreased 7 % year over year, with decreases of 8% at KFC and 5% at Pizza Hut, excluding F/X.
- Opened 524 new stores during the quarter.
- Total store count reached 11,415 as of September 30, 2021, an increase of 1,265 stores over the past year.
- Restaurant margin was 12.2%, compared with 18.6% in the prior year period, primarily due to sales deleveraging.
- Operating Profit decreased 68% year over year to $178 million from $556 million (a 70% decrease excluding F/X), primarily due to sales deleveraging and lapping the non-cash gain of $239 million from the re-measurement of our previously held equity interest in Suzhou KFC in the third quarter 2020.
- Adjusted Operating Profit decreased 48% year over year to $168 million from $320 million (a 52% decrease excluding F/X).
- Effective tax rate was 28.3%.
- Net Income decreased 76% to $104 million from $439 million in the prior year period, primarily due to the decrease in Operating Profit and loss from our mark-to-market investment in Meituan.
- Adjusted Net Income decreased 63% to $96 million from $263 million in the prior year period (a 45% decrease excluding the net loss of $32 million in the third quarter of 2021 and the net gain of $29 million in the third quarter of 2020, respectively, from our mark-to-market equity investment in Meituan; a 50% decrease if further excluding F/X).
- Diluted EPS decreased 78% to $0.24 from $1.10 in the prior year period.
- Adjusted Diluted EPS decreased 67% to $0.22 from $0.66 in the prior year period (a 50% decrease excluding the net loss in the third quarter of 2021 and the net gain in the third quarter of 2020, respectively, from our mark-to-market investment; a 53% decrease if further excluding F/X).
- Results include the consolidation of Huang Ji Huang since April 2020, and Suzhou KFC since August 2020.
In September 2021, Yum China and Luigi Lavazza S.p.A. ("Lavazza") entered into agreements for the previously formed joint venture and announced plans to accelerate the expansion of Lavazza stores in China, aiming to open 1,000 stores by 2025. Together, an initial funding of $200 million will be injected into the joint venture for its future growth. The joint venture is also expected to be Lavazza's exclusive distributor in mainland China to introduce more products from Lavazza's global portfolio. Upon execution of these agreements in September, Yum China consolidates the joint venture results with its 65% equity interest.
Alexis Rubinstein
- Coffee
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Daily coffee report
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