Sign in
YC

Yum China Holdings, Inc. (YUMC)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 delivered steady top-line and improved profitability: revenue rose 4% YoY to $3.21B, operating profit increased 8% YoY to $400M, OP margin expanded 40 bps to 12.5%, and restaurant margin improved 30 bps to 17.3% . Same‑store sales grew 1% and transactions rose 4% (11th straight quarter), supported by KFC +2% SSS and Pizza Hut +1% SSS .
  • Modest beats vs S&P Global consensus: revenue $3.206B vs $3.192B*, EPS $0.76 vs $0.759*, EBITDA $520M (Adj.) vs $514M*; beats were small as delivery‑mix headwinds on labor costs tempered flow‑through (COL +110 bps YoY at group level) . Values with asterisks retrieved from S&P Global.
  • Expansion and mix shift remain the growth engine: 536 net new stores in Q3 (KFC 402; Pizza Hut 158), total stores reached 17,514; delivery sales +32% YoY to 51% of company sales; digital ordering ~95%; members >575M .
  • Guidance maintained: 2025 net new stores 1,600–1,800; KFC franchise mix 40–50%, Pizza Hut 20–30%; 2025 capex $600–$700M; capital returns on track at ~$1.5B in 2025 (dividend $0.24 per share and elevated buybacks) . Near‑term catalyst: Nov 17 Investor Day (Shenzhen) with three‑year strategy update .

What Went Well and What Went Wrong

  • What Went Well

    • Store expansion pace and unit economics: KFC opened a record 402 net new stores in Q3; Pizza Hut surpassed 4,000 stores with 158 net adds; restaurant margins expanded at both brands (KFC +20 bps to 18.5%; Pizza Hut +60 bps to 13.4%) .
    • Digital and delivery scale: Delivery sales +32% YoY; delivery reached ~51% of company sales; digital ordering ~95% of sales, reinforcing frequency and convenience .
    • Product and brand execution: CEO highlighted “solid quarter in a dynamic market… accelerating store openings, achieving positive same‑store sales growth, and expanding margins,” citing hero wings at KFC and thin‑crust pizza at Pizza Hut driving repeat purchases .

  • What Went Wrong

    • Mix‑driven labor headwind: Cost of labor rose 110 bps YoY (group) with higher delivery mix (51% vs ~40% LYQ), partially offset by savings in cost of sales and occupancy; net income fell 5% YoY to $282M and EPS decreased 1% YoY to $0.76 .
    • Membership mix optics: Reported member sales mix fell sequentially (64% in Q2 to ~57% in Q3 for KFC+PH), a mechanical effect from higher aggregator mix where member purchases via aggregators are excluded from the disclosed metric .
    • Market intensity and ticket pressure: KFC ticket average -1% YoY on faster growth of smaller orders; Pizza Hut ticket -13% YoY by design to broaden mass‑market reach; management continues to balance value with profitability .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Billions)$2.981 $2.787 $3.206
Operating Profit ($USD Millions)$399 $304 $400
OP Margin (%)13.4% 10.9% 12.5%
Restaurant Margin (%)18.6% 16.1% 17.3%
Diluted EPS ($)$0.77 $0.58 $0.76

Q3 vs S&P Global Consensus (S&P Global values marked with asterisk; EBITDA uses Adjusted EBITDA actual)

MetricQ3 2025 ActualQ3 2025 ConsensusSurprise
Revenue ($USD Billions)$3.206 $3.1926*+$0.013B (~+0.4%)*
Diluted EPS ($)$0.76 $0.759*+$0.001 (~+0.1%)*
EBITDA ($USD Millions)$520 (Adj.) $514.5*+$5.5M (~+1.1%)*

Values with asterisks retrieved from S&P Global.

Segment Breakdown – Q3 2025

SegmentRevenue ($M)Operating Profit ($M)OP Margin (%)Restaurant Margin (%)Same‑Store Sales (%)Delivery Mix
KFC$2,404 $384 16.0% 18.5% +2% ~51% of KFC company sales
Pizza Hut$635 $57 8.9% 13.4% +1% ~48% of PH company sales

KPIs and Operating Metrics

KPIQ1 2025Q2 2025Q3 2025
Net New Stores (Total)247 336 536
Total Stores (Period End)16,642 16,978 17,514
Delivery Mix (% of Company Sales)~42% ~45% ~51%
Digital Sales ($B)$2.6B $2.4B $2.8B
Digital Ordering (% of Sales)~93% ~94% ~95%
Members (KFC+PH)>540M ~560M >575M
Member Sales Mix (KFC+PH)~66% ~64% ~57%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net New StoresFY 20251,600–1,800 (Q2’25) 1,600–1,800 (Q3’25) Maintained
Franchise Mix (Net Adds)FY 2025KFC 40–50%; PH 20–30% (Q2’25) KFC 40–50%; PH 20–30% (Q3’25) Maintained
CapexFY 2025$600–$700M (revised in Q2’25) $600–$700M (Q3’25) Maintained (was lowered in Q2 from $700–$800M)
Capital Returns2025–2026~$3B over 2025–26 (Q2’25) ~$3B over 2025–26; ~$1.5B in 2025 (incl. $0.24/qtr dividend) (Q3’25) Maintained; buyback plan upped Sept 3 with +$270M open‑market layer
SSS GrowthQ4 2025n/aAim to keep Q4 SSS similar to Q3 New color
Margins2H / Q4 2025Slight improvement in 2H core OP margin (Q2’25) 2H core OP margin slightly higher YoY; Q4 broadly in line with LY due to comp and delivery rider costs Maintained with added Q4 phasing

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1–Q2 2025)Current Period (Q3 2025)Trend
Delivery platforms & subsidiesOpen to all platforms; balanced approach; main headwind is higher rider cost from mix; COL pressure flagged for 2H Subsidies normalized more in coffee/tea; slight decrease in QSR; impact limited as YUMC balances growth and margins; membership mix optics impacted by aggregator accounting Moderating subsidy intensity; delivery mix still rising
AI/digitizationQ1: robotics/GenAI pilots; Q2: first AI Day, hackathon, frontline innovation fund Recognition for AI-enabled efficiency (HBR China award); continued centralization/automation across stores/regions Scaling execution; credibility reinforced
Pricing/value strategyKeep KFC price points steady, lower at Pizza Hut; widened price ranges, more entry-level offerings KFC exploring sub‑CNY 20 meals via select channels; PH ticket down 13% by design; SSS positive at both brands Value focus deepening; mix shifts persist
Margins & cost driversSavings in COS and O&O offset delivery rider costs; guided stable KFC margins, improving PH Same pattern in Q3: COS -40 bps, O&O -100 bps YoY; COL +110 bps on mix; OP margin +40 bps YoY Margin resilience despite mix headwinds
Regional/macroConsumer rational; widening price ranges; >90% local sourcing; minimal tariff exposure Lower‑tier cities slightly better; holiday traffic solid; continue to prioritize value and innovation Stable macro read; travel aids lower tiers
Franchise strategy & capexRising franchise mix; capex/store lowered; PH WOW model broadens reach Franchise economics progressing; no near‑term margin dilution; KFC capex/store now RMB 1.3–1.4M; PH RMB 1.0–1.1M Capital efficiency improving

Management Commentary

  • “We delivered another solid quarter in a dynamic market – accelerating store openings, achieving positive same‑store sales growth, and expanding margins… Our flexible store formats, together with our franchise strategy, enable faster market entry with lower investment.” – Joey Wat, CEO .
  • “Our restaurant margin was 17.3%, 30 bps higher YoY… Savings in cost of sales and occupancy… offset increases in cost of labor… higher delivery mix led to higher rider costs overall.” – CFO commentary .
  • “K‑Coffee Café expanded to 1,800 locations… daily cups sold per store increased 30% YoY… Sparkling Americano series grew over 50% QoQ.” – CFO .
  • “We expect Q4 same‑store sales growth at similar levels as Q3… core operating profit margins for the second half to be slightly higher YoY; Q4 broadly in line with last year due to tougher comps and higher rider costs.” – CFO .

Q&A Highlights

  • Delivery dynamics and subsidies: Management sees limited impact from recent subsidy changes, prioritizing brand price integrity and long‑term positioning while capturing incremental delivery demand .
  • Macro/backdrop: Holiday traffic and domestic travel supported demand; lower‑tier cities slightly better; consumers remain value‑cautious—focus stays on pricing right and operational efficiency .
  • Franchise economics: Progressing, near‑term margins comparable to equity; mid‑long‑run ROIC benefits expected; pricing with franchisees sharing efficiency gains .
  • Membership and aggregators: Reported member mix declined due to accounting exclusion of aggregator orders by members; adjusted member contribution stable QoQ and YoY .
  • Capex/store and rollout: KFC capex/store now RMB 1.3–1.4M; Pizza Hut RMB 1.0–1.1M; supports maintained FY capex and robust new unit cadence .

Estimates Context

  • Revenue beat: $3.206B vs $3.1926B* (+0.4%); EPS beat: $0.76 vs $0.759; EBITDA (Adj.) beat: $520M vs $514.5M* . Values retrieved from S&P Global.
  • Implications: Beats were modest; estimate revisions likely focus on sustained delivery mix (COL headwind), stable KFC margins, and continuing PH margin glide. FY capex/mix and store cadence maintained, reducing near‑term model risk .

Key Takeaways for Investors

  • Mix shift is durable: Delivery at ~51% and rising supports transactions but elevates rider costs; margin resilience depends on continued COS/O&O savings and process automation .
  • Unit growth is the main compounding lever: Record KFC openings and accelerating PH footprint underpin mid‑single‑digit system sales growth with improving capital efficiency (lower capex/store, rising franchise mix) .
  • KFC fortress, PH improving: KFC margins stable at healthy levels; Pizza Hut expanding margins with mass‑market positioning and WOW model rollout—watch thin‑crust traction and city‑tier expansion .
  • Capital returns remain robust: ~$1.5B in 2025 (dividends + repurchases), supported by strong net cash and incremental buyback authorization (Sept. 3) .
  • Guidance steady into year‑end: SSS in Q4 targeted similar to Q3; 2H core OP margin slightly higher YoY; Q4 phasing tougher—manage expectations for seasonal profit dip .
  • Near‑term catalyst: Nov 17 Investor Day with three‑year algorithm and “RGM 3.0” strategic updates; potential for medium‑term targets and capex/mix visibility to re‑rate narrative .
  • Watchlist: Aggregator intensity normalization, labor/rider cost curve, membership mix optics, and per‑store capex trend; modest estimate upward bias likely constrained by delivery‑mix headwinds .

Values with asterisks retrieved from S&P Global.