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Yum China committed to network growth despite Covid-19’s impact on sales

Not even a deadly pandemic is slowing Yum China’s rapid expansion programme, with the company on track to open 850 stores this year.

Yum China this month marked its 10,000-store milestone, opening a KFC in Bo’ao, Hainan province, and CEO Joey Wat says Covid-19 won’t impact on this year’s store rollout plan.

“With our innovation capabilities, strong digital strategy, and resilient business model, I believe we will emerge from this pandemic stronger than ever, and ready to capture the exciting long-term market opportunity in China.”

Wat’s comments accompanied the release of second-quarter results showing Yum China sales recovered from the lockdown-hit first quarter. However, while 99 per cent of stores had reopened by the end of June, sales and profit were “trending unevenly”. Sequential sales growth in April and May, was followed by softening revenues in June, impacted by reduced foot traffic at transportation and tourist locations.

“These factors and the lingering effect of Covid-19 continue to impact operations in July,” the company said.

Total sales fell 11 per cent year on year to US$1.9 billion, or by 7 per cent excluding the effect of exchange rates. 

Total system sales declined 4 per cent year on year, falling 6 per cent at KFC and 12 per cent at Pizza Hut, while same-store sales fell by 11 per cent: 10 per cent at KFC and 12 per cent at Pizza Hut.

Net income fell 26 per cent to $132 million. 

Yum China used digital channels to drive sales during the quarter as a means of adapting to a changing retail environment under the shadow of Covid-19. Delivery and takeaway sales grew strongly over the previous year and now account for more than half of all sales. Purchases by members of Yum China’s loyalty programmes grew at a double-digit rate and now account for 60 per cent of turnover. About 80 per cent of orders were completed digitally.

Yum China CEO Joey Wat delivered a speech at the ceremony

Wat is positive about the company’s prospects despite the pandemic concerns. 

“Our business model is resilient and adaptable. We quickly adjusted our operations and marketing campaigns to meet evolving consumer preferences and market limitations. Rapid innovation, our leading digital infrastructure and our membership programme supported product launches and value offers that were necessary to drive traffic. We protected margins through the flexible cost structure we have developed and optimised over the years. These, along with our other core capabilities such as supply chain and operations, make me confident in our ability to navigate the challenges ahead.”

Yum Brands entered China in 1987 with a single KFC store in Beijing, later launching Pizza Hut and Taco Bell. The company also operates the East Dawning, Little Sheep, Huang Ji Huang and Coffii & Joy brands, with stores in more than 1400 cities and towns across Mainland China.

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