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Yum China Holdings, Inc. (YUMC)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered record first‑quarter revenue ($2.981B), net income ($292M) and diluted EPS ($0.77), with restaurant margin up 100 bps to 18.6% and OP margin up 80 bps to 13.4% . Same‑store sales index returned to 100% for both KFC and Pizza Hut; same‑store transactions rose 6% YoY .
  • Versus estimates: Revenue missed consensus ($3.090B*) and EPS was slightly below ($0.781*), while Q4 2024 had mixed results (EPS slight beat, revenue slight miss) and Q3 2024 saw broad beats (details below). Values retrieved from S&P Global.*
  • Management reiterated 2025 guidance: mid‑single‑digit system sales growth; 1,600–1,800 net new stores; cost of sales 31–32%; effective tax rate high‑20s; KFC margins stable; Pizza Hut margins to improve mid‑/long‑term .
  • Capital returns: $262M returned in Q1 (buybacks $172M; dividends $90M); board declared a $0.24 dividend, and the company remains on track to return $3B during 2025–2026 . Post‑quarter, repurchase authorizations were increased by $510M for 2H 2025, supporting 2025 returns of at least $1.2B .

What Went Well and What Went Wrong

What Went Well

  • Record Q1 performance with revenue $2.981B, net income $292M, diluted EPS $0.77; OP margin 13.4% (+80 bps) and restaurant margin 18.6% (+100 bps) . “We achieved first quarter record highs in revenue, net income and diluted EPS” — Joey Wat .
  • Core brands healthy: KFC OP $386M (+5% YoY ex‑FX), restaurant margin 19.8% (+50 bps); Pizza Hut OP $60M (+27% YoY), restaurant margin 14.4% (+190 bps) as new menu/WOW model improved operations .
  • Transactions and delivery: same‑store transactions +6% overall; delivery sales +13% YoY; digital ordering ~93% of sales; membership surpassed 540M .

What Went Wrong

  • Top‑line growth modest (+1% reported; +2% ex‑FX) due to one fewer business day (leap year), more temporary closures during CNY, and higher strategic closures; net new units contributed ~4% .
  • Ticket averages declined (KFC −4%; Pizza Hut −14%) to expand addressable market, pressuring revenue mix even as margins improved .
  • Cost of labor pressure from delivery mix; rider costs rose as a percent of sales; interest income fell by $12M due to lower cash balance after buybacks/dividends .

Financial Results

Consolidated Results vs prior quarters and consensus

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Billions)$3.071 $2.595 $2.981
Diluted EPS ($)$0.77 $0.30 $0.77
OP Margin (%)12.1% 5.8% 13.4%
Restaurant Margin (%)17.0% 12.3% 18.6%
Revenue Consensus Mean ($USD Billions)*$3.026$2.626$3.090
EPS Consensus Mean ($)*$0.654$0.293$0.781
Actual vs ConsensusRevenue: Beat; EPS: BeatRevenue: Miss; EPS: BeatRevenue: Miss; EPS: Miss

Values retrieved from S&P Global.*

Segment Breakdown (trend)

Segment MetricQ4 2024Q1 2025
KFC Revenue ($USD Millions)$2,246 $2,246
KFC Operating Profit ($USD Millions)$372 $386
KFC OP Margin (%)16.7% 17.2%
KFC Restaurant Margin (%)19.3% 19.8%
Pizza Hut Revenue ($USD Millions)$595 $595
Pizza Hut Operating Profit ($USD Millions)$47 $60
Pizza Hut OP Margin (%)7.9% 10.1%
Pizza Hut Restaurant Margin (%)12.5% 14.4%

Note: KFC/Pizza Hut revenue in Q4 vs Q1 are as reported in segment tables; Pizza Hut total revenue flat; OP/margins improved markedly .

KPIs and Operating Drivers

KPIQ3 2024Q4 2024Q1 2025
Same‑Store Sales Index97% of prior year 99% of prior year 100% of prior year
Same‑Store Transactions Growth+1% +4% +6%
Delivery Sales Growth YoY+18% +14% +13%
Digital Sales ($USD Billions)$2.61 N/A$2.6
Digital Ordering (% of Sales)~90% ~90% ~93%
Total Stores (KFC / Pizza Hut)11,283 / 3,606 11,648 / 3,724 11,943 / 3,769
Net New Stores (Quarter)438 534 247
Delivery Mix (KFC / Pizza Hut Co. sales)~40% / ~39% ~42% / ~42% ~43% / ~42%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
System Sales GrowthFY 2025Mid‑single‑digit (Q4 outlook) Mid‑single‑digit reiterated Maintained
Net New StoresFY 20251,500–1,700 (Q4 outlook) 1,600–1,800 Raised range
CapexFY 2025~$700–$850M ~$700–$800M Narrowed lower
Cost of Sales (% sales)FY 2025Not specified31–32% (modest YoY improvement) New detail
G&A (% revenue)FY 2025Savings noted Slight decrease expected Clarified
Effective Tax RateFY 2025~26.7% in FY 2024 actual High‑20s New detail
KFC Restaurant MarginFY 2025Healthy/stable mid‑/long‑term Healthy and stable YoY Maintained
Pizza Hut MarginFY 2025Gradual improvement Slight improvement in 2025; larger gains mid‑/long‑term Clarified
Tariffs ImpactFY 2025Not specifiedMinimal direct impact; >90% local sourcing; alternatives available New colour
Dividend per shareQ2 2025$0.24 declared in Q1 $0.24 per share payable June 18, 2025 Maintained
Capital Returns2025–2026$3B program $3B reiterated; $262M returned in Q1 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
AI/Technology & AutomationEmphasis on operational efficiency and innovation (RGM 2.0) Continued margin expansion via efficiencies Generative AI resolves ~90% of customer issues; AI for feedback; exploring robotics Accelerating deployment
Delivery Strategy & AggregatorsDelivery +18% YoY; share gains via optimized delivery Delivery +14% YoY Delivery +13% YoY; 70%+ sales outside aggregators; watchful on JD subsidies Sustained double-digit growth; balanced channels
Product InnovationKCOFFEE/WOW expansion Menu evolution; WOW traction KFC spicy Original Recipe launch; CNY buckets +50%; Pizza Hut new menu drives traffic Broadening addressable market
Pricing & ValueValue-for-money offerings noted Value initiatives tightened mix Wider price ranges; lower TA but higher transactions/margins Mix shift continues
Tariffs/MacroFluid backdrop acknowledged —Minimal tariff impact; 90% local sourcing; alternatives available Risk monitored; low direct exposure
Health/Lifestyle Concepts——Introduced K‑Pro lighter meals module; pilot in Tier 1/2 cities New concept rollout

Management Commentary

  • “We achieved first quarter record highs in revenue, net income and diluted EPS… Restaurant margin expanded by 100 bps… operating profit grew by 8% and diluted EPS increased by 10%” — Joey Wat .
  • “We reiterate our 2025 full year guidance of mid‑single‑digit system sales growth… on track to open 1,600 to 1,800 net new stores… target to maintain or slightly improve core OP margins for the full year” — Adrian Ding .
  • “Generative AI helps customers resolve around 90% of issues… we leverage AI to analyze customer feedback… exploring robotics” — Joey Wat .
  • “KCOFFEE sustained strong growth… aiming for 1,500 locations by end of 2025, 200 more than our original target” — Joey Wat .

Q&A Highlights

  • Aggregator competition (JD subsidies): April performance in line; 70%+ sales outside aggregators via dine‑in, take‑away, own app; strategy balances short/long term while monitoring competitive moves .
  • Pizza Hut trajectory: WOW campaign shifted to Q2; margins to improve slightly in 2025 and more meaningfully mid‑/long‑term; COS guided 32–33% for PH; cautious on same‑store sales index fluctuations .
  • Consumer environment: Transactions strong (KFC delivery TC +24% vs sales +13%; PH delivery sales +13% with 50%+ transaction growth in lower TA band); market share gains particularly in delivery .
  • KCOFFEE economics: Low single‑digit same‑store sales uplift; shared equipment/location/labor protects margins; 1,500 cafes target by year‑end 2025 .
  • Brand marketing/health trends: K‑Pro “lighter meals” module piloted (energy bowls, smoothies) leveraging shared KFC footprint; expansion planned in Tier 1/2 cities .

Estimates Context

  • Q1 2025: Revenue $2.981B vs consensus $3.090B* — Miss; EPS $0.77 vs consensus $0.781* — Miss. Values retrieved from S&P Global.*
  • Q4 2024: Revenue $2.595B vs $2.626B* — Miss; EPS $0.30 vs $0.293* — Beat. Values retrieved from S&P Global.*
  • Q3 2024: Revenue $3.071B vs $3.026B* — Beat; EPS $0.77 vs $0.654* — Beat. Values retrieved from S&P Global.*

Implications: The Q1 top‑line/earnings slight shortfall versus consensus reflects lower ticket averages and tactical closures around CNY despite strong transactions; estimates for Q2 may need to reflect tougher YoY margin comps and June lapping noted by management, while longer‑term margins/growth are supported by efficiency projects and expanding store/cafe footprints .

Key Takeaways for Investors

  • Transaction‑led growth with margin expansion continues even as ticket averages decline; operational efficiency and menu simplification are offsetting labor and delivery mix pressures .
  • Near‑term caution: management highlights potential fluctuations in same‑store sales index and tougher YoY margin comparisons later in 2025 due to 2024 project tailwinds and narrowing commodity deflation .
  • KFC remains the margin/earnings anchor; Pizza Hut’s new menu/WOW model is driving a margin inflection with 29% OP growth in Q1 .
  • Capital returns are robust and likely a continuing upside driver: $262M returned in Q1; $3B planned over 2025–2026; incremental buybacks announced for 2H 2025 .
  • AI/automation adoption is deepening across operations and customer service, supporting sustained efficiency gains and faster product feedback cycles .
  • Tariff risk minimal near term (>90% local sourcing), mitigating macro uncertainty; supply chain alternatives identified .
  • For trading: watch Q2 cadence (June lapping, WOW campaign shift) and delivery mix‑driven labor costs; longer‑term thesis depends on efficient growth (1,600–1,800 net new stores), KCOFFEE scale, and Pizza Hut WOW rollout .

Appendix: Other Relevant Press Releases in Q1 2025

  • HKEX disclosure regarding possible quarterly dividend ahead of April 30 board meeting (procedural advance notice) .
  • Q1 earnings release and conference call logistics (April 30) .