Anne Ling

Anne Ling from Jefferies questioned the potential long-term restaurant and operating margin goals for Pizza Hut, referencing its historical highs in 2013.

Answer

CFO Adrian Ding indicated that detailed long-term guidance would be provided at the November Investor Day. For now, he reiterated the outlook for moderate margin improvement for the full year 2025. He outlined mid-to-long-run opportunities for margin expansion across cost of sales, labor, and other expenses, suggesting Pizza Hut's margin could eventually settle between its current level and KFC's.

Anne Ling from Jefferies asked about the potential long-term restaurant and operating margin goals for Pizza Hut, referencing its historical highs and questioning what it would take to achieve further improvement with the current business model.

Answer

CFO Adrian Ding noted that detailed long-term guidance would be shared at the November Investor Day. However, he confirmed opportunities for margin improvement across cost of sales, labor, and other expenses, suggesting a mid-to-long-run goal for Pizza Hut's margin to land somewhere between its current level and KFC's. This would be driven by efficiencies, automation, and lower-CapEx models like Pizza Hut Wow!.

Anne Ling from Jefferies requested more details on the performance of the KCOFFEE side-by-side stores, asking about the incremental sales benefit to the host KFC store and any available data on profitability.

Answer

CEO Joey Wat shared that the KCOFFEE side-by-side model provides a 'single-digit sales uplift' to the host store and is incrementally profitable due to its efficient operating model. She highlighted the rapid expansion to over 500 cafes and noted the significant growth opportunity, as a majority of Yum China's members have yet to try KCOFFEE.