On February 7th, Yum! Brands China released its fourth quarter and full year financial reports for 2023. The reports showed that Yum! Brands China achieved a revenue of 10.978 billion US dollars, a year-on-year increase of 14.72%, and a net profit of 827 million US dollars, a year-on-year increase of 87.10%.
As of the fourth quarter of 2023, Yum! Brands China achieved revenue of $2.493 billion, a year-on-year increase of 19.40%, higher than analyst expectations of $2.33 billion, and a net profit of approximately $97 million, a year-on-year increase of 83.02%.
After the financial report was released, Yum! Brands China's stock price quickly rose in the Hong Kong stock market after opening, rising by about 28.06% during the day. As of noon closing, it was at HKD 332.0, an increase of 14.48%, with a market value of HKD 134.8 billion. In the US stock market, Yum! China closed at $37.44, up 4.20%, on February 6th Eastern Time.
Yum! Brands China's annual sales increased by 21%
Expected to add at least 1500 new stores this year
For the entire year of 2023, Yum! China's overall sales increased by 21% year-on-year, while the previous year recorded a negative growth of 5%. This is mainly due to the contribution of its new stores and the growth of same store sales, coupled with a lower base affected by the epidemic in 2022. Yum! Brands China's same store sales increased by 7% year-on-year last year, while recording a negative growth of 7% in the previous year. The operating profit was $1.106 billion, a year-on-year increase of 75.83%, and the restaurant profit margin increased to 16.3%.
Specifically, in the fourth quarter of last year, Yum! Brands China's overall sales increased by 21% year-on-year, while the previous year recorded a negative growth of 4%. During the same period, its same store sales growth rate increased from -4% to 4%, with operating profit of $110 million, a year-on-year increase of 168.29%. The restaurant's operating profit margin increased to 10.7%.
However, compared to the first three quarters of last year, Yum! China's performance in the fourth quarter was relatively poor. In the first to fourth quarters of 2023, Yum! China achieved revenue of 2.917 billion US dollars, 2.654 billion US dollars, 2.914 billion US dollars, and 2.493 billion US dollars respectively; During the same period, its net profits were $289 million, $197 million, $244 million, and $97 million, respectively.
Yum! Brands in China include KFC, Pizzahut, Taco Bell, Huang Jihuang, Little Sheep and Lavazza. By the end of December 2023, KFC had 10296 stores, 3312 Pizzahut stores and 1036 stores of other brands. Yum! Brands China had 14644 stores nationwide, with a net increase of 1697 stores throughout the year.
In its financial report, Yum! Brands China stated that it expects a net increase of 1500-1700 stores this year, with a total of 20000 stores expected by 2026.
KFC Pizzahut unit price continues to fall
Response stated that it is still higher than pre pandemic levels
KFC and Pizzahut are the main catering brands of Yum! Brands in China.
In 2023, KFC's revenue increased by 14.14% year-on-year to $8.24 billion, with a growth rate of 7% in same store sales compared to the previous year's -7%. Operating profit increased by 52.73% year-on-year to $1.202 billion, and the operating profit margin increased by 2 percentage points year-on-year to 17.7%.
In response to changes in operating profit margins, Yum! China pointed out that the main reasons were an increase in same store sales and a decrease in raw material prices. However, some of the growth was offset by increased costs due to increased promotional efforts and rising wage costs.
In the fourth quarter of last year, KFC's revenue increased by 17.66% year-on-year to $1.872 billion, operating profit increased by 42.74% year-on-year to $167 million, and operating profit margin decreased by 0.7 percentage points to 12.0%.
In 2023, Pizzahut's revenue will increase by 14.59% year-on-year to US $2.246 billion, and its operating profit will increase by 52% year-on-year to US $137 million. In the fourth quarter of last year, Pizzahut's revenue increased by 22.77% year on year to $496 million, and its operating profit turned from a loss of $20 million in the previous year to $0.05 billion.
In the fourth quarter of last year, the average customer price of KFC and Pizzahut continued to decline. During the reporting period, KFC's average unit price decreased by 11% year-on-year, while transaction volume increased by 16% year-on-year; Pizzahut's average customer price fell by 8% year on year, while its trading volume rose by 15% year on year. In the third quarter of 2023, the average customer price of KFC and Pizzahut fell by 5% and 9% respectively year on year.
In response, Yang Jiawei, the CFO of Yum! Brands China, pointed out at the financial report meeting that this pricing strategy is aimed at expanding its market coverage, especially in some small cities, by providing more products and expanding the price range, providing consumers with more choices to drive growth in transaction volume and sales. Moreover, KFC's average unit price in the fourth quarter of last year was 39 yuan, which is basically the same as the third quarter and higher than the pre pandemic level.
According to the data disclosed at the financial report meeting, from 2019 to 2023, the average average average unit price of Yum! Brands China was 37 yuan, 40 yuan, 39 yuan, 42 yuan, and 41 yuan, respectively.
Yum! Brands China CEO Qu Cuirong stated at the financial report meeting that although Chinese consumers are becoming more rational, China's GDP is still growing by 5%, so consumer upgrading will continue. In 2023, Yum! Brands China opened 400 stores in shopping malls, with two-thirds of the stores only opening in the second half of the year, and the operating conditions of these stores are better than those in other locations. Therefore, Yum! Brands China will be more cautious in adjusting its pricing strategy by launching product combinations at different prices, ranging from a 50 yuan package to a 20 yuan entry-level package, entering different segmented markets.
Interviewer: Zhan Danqing, reporter from Nandu Bay Finance Society