Sijie Lin

Sijie Lin asked for Yum China's assessment of the delivery platform subsidy trend and its potential impact in 2026. She also inquired whether platform competition is expected to mitigate and what measures Yum China will take to attract customers back to its own channels.

Answer

CFO Adrian Ding stated that Yum China has planned for various subsidy scenarios and is confident the impact on its business will be limited due to a disciplined approach to sales, margin protection, and price integrity. He reiterated the long-term view that delivery aggregator competition benefits larger merchants by offering choices and opportunities to secure long-term advantages, emphasizing the company's ability to protect and slightly increase margins, as demonstrated in previous quarters.

Sijie Lin from CICC sought insight into Yum China's strategic planning and methodologies for expanding new store formats and categories, such as K-Coffee, K-Pro, Wow, and Fried Chicken Brothers. She asked whether the company focuses on a few promising categories or tries various options, and what key considerations drive the development of new models or categories.

Answer

CEO Joey Wat explained that Yum China is focused on growth initiatives for both same-store and system sales, with K-Coffee ahead of schedule and K-Pro accelerating. The strategy involves front-end customer and location segmentation combined with back-end utilization of existing equipment, resources, and labor to deliver operational efficiency and incremental sales/profit. She noted K-Pro provides alternatives for KFC customers, leveraging food safety trust and synergy, while acknowledging that new concepts involve trials and not 100% success rates.

Sijie Lin asked about Yum China's strategic planning and methodologies for expanding new store formats and categories, such as K-Coffee, KPRO, and Fried Chicken Brothers, and the key considerations for developing new models.

Answer

CEO Joey Wat stated that Yum China is focused on growth initiatives, with K-Coffee expansion ahead of schedule and KPRO accelerating. She explained the strategy of front-end customer segmentation and back-end resource consolidation to deliver incremental sales and profit with smaller investments. While focusing on promising categories and leveraging synergies, she acknowledged that new concepts involve trials and not 100% success rates, with early-stage initiatives like Fried Chicken Brothers.

Sijie Lin from CICC inquired about the strategy behind the increasing franchise mix for new stores, asking if it was a defensive move or a strategic choice to balance growth and profitability.

Answer

CEO Joey Wat clarified that franchise growth is considered incremental to the company's profitable equity store openings. The strategy is focused on two key areas: penetrating lower-tier cities where franchisees can be more effective, and securing locations in strategic channels like transit hubs or tourist sites where franchisees have better access.

Sijie Lin of CICC asked about the strategy behind the increasing franchise mix for new stores, questioning if it's a reaction to macro uncertainty or a strategic choice based on location, and how this is balanced with profit maximization.

Answer

CEO Joey Wat clarified that franchise stores are considered incremental to the company's profitable equity store openings. The strategy focuses on two areas: lower-tier cities where local franchisees can operate more effectively, and strategic channels like high-speed rail stations where franchisees have site access that the company does not.

Sijie Lin asked about Yum China's evolving brand marketing plans, particularly in response to market trends like health-consciousness and the demand for emotional value through IP collaborations.

Answer

CEO Joey Wat highlighted the company's success in marketing its brands through relevant IP collaborations to provide emotional value. To address the health trend, she introduced the 'K-Pro' concept, a module within KFC stores focused on lighter fare like energy bowls and smoothies. This model leverages existing infrastructure for a light-investment expansion into a new category, with more details to be shared at the upcoming Investor Day.

Sijie Lin from CICC asked about Pizza Hut's pricing strategy, inquiring about the impact of recent promotions on sales and margins, and whether the Q4 ticket average of RMB 78 has reached the company's target level.

Answer

CEO Joey Wat responded that the company's goal is to continue driving Pizza Hut's ticket average (TA) down further from the RMB 78 level to strengthen its mass-market positioning. She highlighted the success of the December new menu, where prices on 30 iconic products were lowered. Crucially, she noted that margins on these items were kept neutral through product and operational innovation. This strategy of offering straightforward value resonated with customers, driving strong transaction growth, and is a model the company will continue to pursue.

Sijie Lin of CICC asked how Yum China balances cost control initiatives with maintaining high product and service quality, particularly in light of recent food safety incidents that occurred overseas.

Answer

CEO Joey Wat asserted that food safety is the company's highest priority and is never compromised for cost. She noted the specific overseas issue was not relevant as Yum China uses cooked, not raw, onions. Wat detailed the company's robust safeguards, including a comprehensive QA system, a dedicated food safety committee reporting to the board, significant investment in a digital supply chain, and over 300 QA employees.

Sijie Lin from CICC asked for insights into Atour Lifestyle Holdings' recent new hotel signing trends and any adjustments to the full-year hotel opening and closure targets.

Answer

CEO Haijun Wang stated that new hotel signings are generally in line with the previous year, maintaining a steady pace while focusing on quality and core locations. He confirmed confidence in achieving 500 new openings and 2,000 premier hotels by year-end, with approximately 80 closures expected for the full year to enhance network quality.

Sijie Lin of CICC questioned the retail business's strong performance, asking for the updated full-year revenue guidance, future development plans, the rollout pace for new sleep products, and any potential challenges.

Answer

Management raised the full-year revenue growth guidance for the retail business to 60% year-over-year, citing strong performance and positive market feedback for new products. Future plans include launching upgraded versions of the Deep Sleep pillow and comforter series. To address intensifying competition, the company will focus on strengthening its supply chain, enhancing R&D innovation, and maintaining strict quality control, mirroring the high-quality growth strategy of its hotel business.

Sijie Lin of CICC noted the strong performance of the retail business and asked for the updated full-year revenue guidance for the segment. He also requested details on future development, including new product rollouts and potential challenges.

Answer

CEO Wang Haijun (via moderator) announced that due to strong momentum, the full-year revenue growth guidance for the retail business has been raised to 60% year-over-year. He mentioned upcoming product launches, including upgraded pillows and comforters. To counter intensifying competition, the company will focus on strengthening its supply chain, R&D, and quality control, extending the high-quality growth philosophy from its hotel business to retail.

Sijie Lin from CICC inquired about the strategic plan for Atour's retail business in 2025, including any plans for new products and specific revenue targets.

Answer

CEO Haijun Wang outlined a strategy focused on enhancing product R&D, consolidating leadership in the sleep category, and expanding the product matrix to create more 'blockbuster' items. He added that the retail business, which contributed 30% of group revenue in 2024, is expected to grow by no less than 35% year-over-year in 2025, outpacing the hotel business's growth.

Sijie Lin from CICC asked for the opening guidance for the new Atour 4.0 hotels in the current year, their potential contribution to RevPAR, and the latest progress on the company's planned upscale brand upgrades.

Answer

Founder, Chairman and CEO Haijun Wang stated that 8 to 10 Atour 4.0 hotels are expected to open in 2024 from a pipeline of 50 signed projects. He highlighted the first 4.0 hotel's strong initial performance, with a RevPAR exceeding RMB 710, and confirmed that the company plans to officially launch its next-generation upscale brand within the year.

Sijie Lin of CICC asked for specific details on how H World is strengthening its supply chain capabilities and the extent to which this will reduce future operating costs. A second question focused on the expected pace of the shift to an asset-light model for the legacy DH (Deutsche Hospitality) business.

Answer

Jason Chen, Head of IR, and Jihong He, CSO, responded. Jason Chen detailed supply chain upgrades, including partnering with top-tier suppliers and increasing modularization, which has already led to 10-20% cost declines in materials and a 30-day reduction in construction time for HanTing 4.0. Jihong He explained that the asset-light shift for DH is complex due to German legal requirements around lease contracts. While the company is actively negotiating with landlords of underperforming hotels and is cautious about signing new leases, the process is ongoing.

Sijie Lin from CICC asked why the upper-midscale segment appeared to perform better in terms of RevPAR and pipeline growth, despite broader pressure on business demand. She sought to understand the market conditions and H World's competitive strategy in this segment.

Answer

CEO Hui Jin attributed the outperformance to a focused strategy to 'reform' the traditional upper-midscale segment. He highlighted the company's efforts in enhancing product and service offerings, executing targeted marketing campaigns, and leveraging its powerful membership program to build a loyal customer base. He also noted ongoing optimizations to the loyalty program specifically for this segment.

Sijie Lin from CICC asked why the upper mid-scale segment is outperforming the economy segment in RevPAR and pipeline growth, despite overall pressure on business demand. She also asked about H World's strategy to enhance its competitiveness in this specific segment.

Answer

CEO Jin Hui attributed the outperformance to a strategic effort to 'reform' the traditional upper mid-scale market with superior products, services, and targeted marketing. He emphasized that H World is leveraging its strong membership program and innovative product design to increase customer loyalty and brand recognition, which has been key to its successful breakthrough in the segment.