On February 6, 2024, Yum China Holdings Inc (YUMC, Financial) released its 8-K filing, announcing a remarkable close to the fiscal year with significant growth in system sales, operating profit, and an aggressive share repurchase plan. YUMC, the largest restaurant chain in China, operates nearly 13,000 units and generated USD 10 billion in systemwide sales in 2022. The company's portfolio includes well-known brands such as KFC, Pizza Hut, Little Sheep, East Dawning, Taco Bell, Huang Ji Huang, COFFii & Joy, and Lavazza.
Financial Performance and Strategic Highlights
YUMC's financial achievements in the fourth quarter and full year of 2023 were impressive. The company's total system sales grew by 21% year over year, excluding foreign currency translation effects. This growth was primarily driven by a 12% net new unit contribution, 4% same-store sales growth, and the recovery from temporary closures due to the pandemic in the previous year.
YUMC's operating profit for the fourth quarter increased by a staggering 170% to $110 million, while core operating profit grew by 324%. For the full year, operating profit grew by 76% to $1.1 billion, with core operating profit up by 79%. The company's restaurant margin also saw a healthy expansion, with a 170 basis point increase in the fourth quarter and a 270 basis point increase for the full year, excluding items affecting comparability at the restaurant level.
The company's diluted earnings per share (EPS) saw a significant increase of 77% to $0.23 in the fourth quarter and an 89% increase to $1.97 for the full year. These figures exclude special items as well as unfavorable impacts from foreign currency translation and the mark-to-market investment in Meituan.
Dividends and Share Repurchases
YUMC has demonstrated a strong commitment to returning value to its shareholders. In the fourth quarter, the company returned approximately $390 million to shareholders through share repurchases and cash dividends. For the full year, this figure reached $833 million, marking the highest full-year return in the company's history since its spinoff.
The board declared a 23% increase in cash dividend to $0.16 per share, payable on March 26, 2024. Additionally, YUMC plans to repurchase $1.25 billion of its common stock in 2024, signaling confidence in the company's future growth prospects.
Outlook and Expansion
Looking ahead, YUMC has set ambitious targets for 2024-2026. The company plans to open approximately 1,500 to 1,700 net new stores and make capital expenditures in the range of $700 million to $850 million. By 2026, YUMC aims to reach a total store count of 20,000 and achieve a high-single-to-double-digit compound annual growth rate (CAGR) for system sales and operating profit, as well as a double-digit CAGR for EPS.
YUMC's CEO, Joey Wat, expressed optimism about the company's growth opportunities in China, stating,
Currently serving just one-third of China's population, our ambitious goal is to extend our reach to half of the population by 2026."Wat highlighted the strategic positioning of new stores in lower-tier cities and the expansion of the addressable market through innovative products and campaigns.
Corporate Responsibility and Recognition
YUMC's commitment to corporate sustainability has been recognized globally, with the company ranking number one in the Restaurant & Leisure Facilities Industry in the S&P Global 2023 Corporate Sustainability Assessment. Additionally, YUMC was named a Top Employer in China for the sixth consecutive year and appeared on the Fortune World’s Most Admired Companies list for 2024.
For more detailed financial information and the full earnings release, please refer to the 8-K filing.
Explore the complete 8-K earnings release (here) from Yum China Holdings Inc for further details.
