Yum China Posts Quarterly Sales That Fall Short of Expectations

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Yum China Holdings Inc. slumped in late trading on Wednesday after second-quarter results missed expectations -- showing that consumer demand in the nation remained muted as Covid-19 effects persist.

  • The key metric of same-store sales rose 5%, well below analysts’ estimate of 11.2%. Both of the company’s chains -- KFC and Pizza Hut -- fell short.

Key Takeaways

  • Covid-19 complications continue to limit consumer demand in China. The company said an outbreak of the delta variant in southern China in late May interrupted a recovery in sales. “Across China, cautious consumer behavior persists as sporadic outbreaks remind consumers of the lingering risks,” Yum China said.
  • The company said that in many areas, its results remain below the pre-pandemic levels of 2019. That shows a clear contrast with the U.S., where consumer demand has roared back and pushed the nation’s biggest restaurant operators to new heights of sales. “With the lingering effects of the pandemic, we continue to expect full recovery of same-store sales to pre-pandemic 2019 levels to take time, with a recovery path that is nonlinear and uneven,” Chief Financial Officer Andy Yeung said in the company’s statement.
  • Delivery orders made up about 30% of sales in the second quarter, up about 1 percentage point from the previous year. Yum China said “consumers are still cautious about dine-in.”

Market Reaction

  • Yum China Holdings, Inc. shares fell 4.2% in post-market trading in New York on Wednesday. They had risen 9.3% this year through Wednesday’s close.

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