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    Lillian Lou • Morgan Stanley

    Lillian Lou's questions to Yum China Holdings Inc (YUMC) leadership

    Lillian Lou's questions to Yum China Holdings Inc (YUMC) leadership • Q2 2025

    Question

    Lillian Lou of Morgan Stanley asked for details on the new Pizza Hut 'Wow' store format, including opening targets, margin levels, and the pace of growth, given its reported performance improvements.

    Answer

    CEO Joey Wat highlighted that the 'Wow' model is successfully helping Pizza Hut penetrate new, lower-tier cities. CFO Adrian Ding stated that specific opening guidance is not yet available as the model is still being refined. He confirmed 'meaningful improvement' in profitability and noted the new stores have a lower CapEx of RMB 650k-850k and encouraging initial sales, though converted store profitability is still slightly below the main Pizza Hut model.

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    Lillian Lou's questions to Yum China Holdings Inc (YUMC) leadership • Q2 2025

    Question

    Lillian Lou of Morgan Stanley inquired about the new Pizza Hut Wow! store format, asking for specific opening targets, details on its operational performance, current margin levels, and growth pace.

    Answer

    CEO Joey Wat expressed excitement for the Pizza Hut Wow! model, highlighting its success in penetrating over 10 new lower-tier cities. CFO Adrian Ding stated that while specific opening guidance is not yet provided, the model has shown meaningful, sequential profitability improvements and encouraging initial sales with a lower CapEx of RMB 650k-850k, though they continue to monitor its performance.

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    Lillian Lou's questions to Yum China Holdings Inc (YUMC) leadership • Q1 2025

    Question

    Lillian Lou asked about post-Q1 demand trends, the competitive impact from delivery aggregators offering significant subsidies, and Yum China's strategic response.

    Answer

    CEO Joey Wat stated that April performance was in line with expectations and no significant negative impact had been observed, though the company remains watchful. She emphasized Yum China's deep connection with consumers and its ability to navigate challenging markets. Wat noted that while they work with all platforms, over 70% of sales come from their own channels (dine-in, takeaway, proprietary delivery), which provides a strong degree of control over their business.

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    Lillian Lou's questions to Yum China Holdings Inc (YUMC) leadership • Q4 2024

    Question

    Lillian Lou from Morgan Stanley asked about the margin outlook for 2025, seeking to understand which cost lines offer potential for further savings following the significant payroll efficiencies seen in Q4.

    Answer

    Acting CFO Adrian Ding guided that the full-year 2025 core OP margin is expected to be relatively stable or slightly improved. He broke down the components, expecting slight improvement in Cost of Sales (COS) and a slight decrease in G&A as a percentage of sales. However, Cost of Labor (COL) will face headwinds from wage inflation and a higher delivery mix, while Occupancy & Other (O&O) costs are likely to be stable. CEO Joey Wat added that labor efficiencies are driven by ongoing initiatives in simplification, automation, centralization, and digitization, such as using generative AI in hiring.

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    Lillian Lou's questions to Yum China Holdings Inc (YUMC) leadership • Q3 2024

    Question

    Lillian Lou from Morgan Stanley asked about the near-term pricing strategy for KFC, noting a nice recovery in Q3. She sought to understand the drivers, such as competitive pressures, and the outlook for pricing in the coming quarters.

    Answer

    CEO Joey Wat explained that while the restaurant industry remains competitive, some players have rationalized promotional intensity. She clarified that KFC's strategy is to maintain stable pricing, with the Q3 ticket average of RMB 38 being relatively consistent. Conversely, Pizza Hut's strategy continues to focus on lowering its ticket average to broaden its mass-market appeal.

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