Yum China Q2 Earnings Call Highlights

Yum China NYSE: YUMC reported second-quarter growth in sales, operating profit and earnings, extending what Chief Executive Officer Joey Wat described as the company’s ninth consecutive quarter of simultaneous system sales growth, operating profit growth and operating-margin expansion.

Revenue increased 13% in the quarter, while system sales rose 6% excluding foreign-exchange effects. Same-store sales grew 1%, improving from the first quarter, supported by a 14th consecutive quarter of same-store transaction growth. The company opened 560 net new stores during the quarter and about 1,209 new stores in the first half, roughly double the pace of the prior-year period. Chief Financial Officer Adrian Ding said operating profit reached a second-quarter record of $348 million, up 7% year over year. Net income rose 6% to $244 million, while diluted earnings per share increased 14% to $0.70. Excluding the impact of Yum China’s investment in Meituan, diluted EPS increased 10%.

KFC system sales increased 7% year over year in the second quarter, accelerating from 5% growth in the first quarter. Same-store sales rose 1%, with a 4% gain in transactions more than offsetting a 3% decline in average ticket. The average ticket was CNY36, reflecting more small orders from new customer segments and locations including KCOFFEE Cafe and KPRO. Despite higher delivery-related rider costs, KFC’s restaurant margin expanded 20 basis points to 17.1%, while its operating margin also increased 20 basis points. Ding said delivery sales represented 54% of Yum China’s sales in the quarter, compared with 45% a year earlier, and rider costs reduced margin by 140 basis points.

The company continued to expand KFC’s side-by-side formats. KCOFFEE Cafe exceeded 3,300 locations and remains on track to reach 5,000 locations by the end of 2027. KPRO, the company’s light-meal concept, expanded to more than 450 locations. Yum China now expects KPRO to reach about 800 locations by year-end, above an earlier target of 600. Ding said KCOFFEE Cafe generated a mid-single-digit sales uplift for parent stores, while KPRO generated about a 20% uplift. Capital expenditures for both modules have fallen by about half compared with earlier modules last year, he said. Wat said KCOFFEE Cafe generated about CNY1 billion in sales last year and is targeted to approach CNY2 billion this year. KPRO is expected to quadruple sales this year and exceed CNY1 billion in sales next year. More than 80% of KPRO sales have come from KFC members, according to Wat.

Pizza Hut system sales rose 6% in the second quarter, following 4% growth in the first quarter. Same-store sales returned to growth at 1%, as a 13% increase in transactions offset an 11% decline in average ticket. The average ticket declined to CNY68, moving closer to Yum China’s CNY60 to CNY70 target range under its mass-market strategy. Pizza Hut opened 381 net new stores in the first half, nearly matching its total openings for all of 2025. The company said it is preparing to become the owner of the Pizza Hut brand in mainland China after operating the brand for 36 years. Wat said ownership is expected to save license fees, improve store economics and provide greater flexibility to pursue new products, formats and expansion plans. Yum China now expects Pizza Hut net new openings to exceed 800 annually in 2027 and 2028, compared with its prior target of more than 600. The company’s Pizza Hut Burger Bar had expanded to more than 200 locations within six months. Wat said the format has delivered double-digit incremental sales and meaningful profit to parent stores. Yum China plans to expand Burger Bar to 500 to 600 locations by the end of 2026, representing roughly 10% of Piz...