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Yum China sales fall as pandemic impact worsens

(Source: Bigstock)

Restaurant operator Yum China recorded a 57-per-cent fall in net income during the first quarter despite a 4-per-cent increase in sales.

The company, which operates KFC and Pizza Hut chains, among others, in Mainland China, said it expects a loss for the second quarter as the government tightened movement restrictions in a bid to reduce the spread of Omicron. 

The company operating profit dropped 44 per cent year on year, and Yum China recorded a loss from its investment in Meituan Dianping. Same-store sales decreased 8 per cent on year, largely due to a sharp drop in March (more than 20 per cent). 

“First-quarter operational performance was significantly impacted by the surge of Omicron variant in March,” said Andy Yeung, CFO of Yum China. “The case counts, duration, coverage, and severity of restrictive measures are far more extensive than previous outbreaks.

“Unless the Covid-19 situation improves significantly in May and June, we expect to incur an operating loss in the second quarter.”

The company said it will pull back on advertising and promotional activities, temporarily suspend its store remodelling program, negotiate rent relief, and optimise its raw material cost structure. 

During the quarter, the company opened 329 new stores, taking its stores tally to more than 12,000, mainly adding KFC and Pizza Hut stores. 

Last month, Yum China committed to expanding the Taco Bell store network to at least 100 stores by the end of this year and at least 225 stores by the end of 2025, with investment support from its US part-owner Yum! Brands. The company will have the exclusive right to operate and sublicense the Taco Bell brand in China for 50 years.

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