Accelerates network expansion to reach 20,000
stores by 2026
Targets double-digit EPS CAGR and $3 billion shareholder return from 2024 to
2026
SHANGHAI, Sept. 14,
2023 /PRNewswire/ -- Yum China Holdings, Inc. (NYSE:
YUMC and HKEX: 9987, "Yum China" or
the "Company") hosted its 2023 Investor Day today in Xi'an, China. At the event, Yum China's CEO Joey
Wat, CFO Andy Yeung and
members of the management team formally launched the Company's
refreshed "RGM 2.0" strategy to an in-person audience in
Xi'an and to an online audience
via webcast. Presentations highlighted the Company's strategic
initiatives to accelerate network expansion, drive sales growth and
boost profits. Yum China is striving
to reach 20,000 stores by 2026 and to achieve
high-single-to-double-digit CAGR for system sales and operating
profit as well as double-digit EPS CAGR from 2024 to 2026, compared
to base year 2023 and in constant currency. The Company targets to
return approximately $3 billion to
shareholders through quarterly dividends and share repurchases over
the same three-year period, doubling the shareholder return of the
past three years.
Joey Wat, CEO of Yum China, commented, "We are excited about the
significant opportunities China presents. In 2021, we implemented
our "RGM" strategy, which stands for "Resilience, Growth and Moat."
Thanks to the tireless efforts of our team and their exceptional
execution, we expanded our footprint, achieved robust performance
and remained profitable throughout the past three years. Further,
we have transformed our business, emerging even stronger and better
positioned for growth. Moreover, we have strengthened emotional
connections with customers. Going forward, we are transitioning our
RGM strategy to place greater emphasis on growth. By leveraging
flexible store formats and strategically partnering with
franchisees, we are expanding into more locations. Through our
delicious and innovative food offerings, combined with amazing
value for money, we are winning over more customers and giving them
compelling reasons to choose us. As we continue to expand, we
believe our improved cost structure and proactive cost management
will enable us to sustain and potentially improve our profitability
over time. Our ambitious financial growth targets for 2024 to 2026
reflect our unwavering commitment to delivering value to our
shareholders, affirming our confidence in our prospects, expanding
our reach, and driving robust growth."
Additional highlights from the Investor Day presentations are
included below.
2023 Investor Day Highlights:
KFC: Most powerful quick-service restaurant brand in
China – Huge potential lies
ahead
This year, KFC will celebrate its 10,000th store in
China. Even with a presence in
over 1,900 cities, KFC continues to expand its addressable market.
There are over 1,100 unpenetrated cities and significant untapped
opportunities in strategic locations such as highway service
centers, hospitals and college campuses. The brand plans to
accelerate its annual net new store openings to over 1,200 in the
next three years, 15% to 20% of which are projected to be franchise
stores. To achieve this, KFC has a variety of new store models and
modules that enable customization to suit different trade zones and
city tiers. Concurrently, KFC continues to drive sales growth with
a wide array of delicious and innovative food and drink offerings,
signature campaigns, and popular toys and games. The brand plans to
further improve its flexibility and productivity through various
cost structure rebasing initiatives such as store management
sharing, securing favorable lease terms with variable rent
components, enhancing automation in operations and centralizing
store processes.
Pizza Hut: Leading casual dining restaurant brand in
China – Transformed for
accelerated growth
Having passed the 3,000-restaurant mark this year, Pizza Hut is
on track to achieve record-high net new stores in 2023, and plans
to further increase the pace to 400-500 net new stores annually in
the next three years. The brand intends to drive footprint growth
with flexible store formats such as its proven satellite store
format. At the same time, Pizza Hut is expanding its mass market
appeal by creating affordable occasions, driving off-premise sales
and streamlining services. The brand continues to reinforce its
leadership position in the pizza category and is also expanding
into more categories such as burgers and coffee. Pizza Hut also
aims to further grow existing occasions such as breakfast and
individual meals. Additionally, the brand will continue to
transform its cost structures for more resilience and
flexibility.
Lavazza: Iconic Italian coffee brand – Targeting China's
fast-growing coffee segment with encouraging progress
Yum China's joint venture with
world-renowned Italian coffee brand Lavazza has made encouraging
progress in the past two years, now operating over 100 coffee shops
in 11 cities along with a growing retail business. With an ambition
to reach 1,000 stores in the next three to five years, it is
deploying a four-pillar strategy focused on investing in brand
building, refining its menu with a mix of authentic Italian and
locally-inspired beverage and food items, expanding its digital
presence and enhancing delivery capabilities, as well as upgrading
store design and experience. In addition, the joint venture plans
to further expand its retail business through collaborations with
premium partners such as hotels, fine dining establishments and
retailers, leveraging Lavazza's quality coffee beans.
Embracing AI to build future-ready digital
capabilities
Yum China's rapid expansion is
supported by a dynamic AI-empowered digital infrastructure. Through
digitalized operational tools and automated technology solutions,
the Company has streamlined workflows, empowered store management
and increased flexibility. This has allowed 80% store growth since
2016 with a relatively flat headcount. In addition, to support the
growth of franchise stores, Yum
China has been building an integrated digital solution for
franchise management. Going forward, the Company is broadening its
use of AI technologies to further improve customer experience,
store operations and people management. Strong in-house digital
capabilities and the development of a company-wide knowledge base
will drive innovation in future AI-enabled applications.
World-class supply chain supports long-term growth
Over the years, Yum China has
built a formidable, agile and highly efficient supply chain to
support its growth. With upstream supplier collaborations and
innovative solutions such as full utilization of raw materials, the
Company has been able to maintain competitive raw material costs.
Going forward, the Company is building more company-owned logistics
centers to enhance digitalized operations and create flexibility.
The Company's ongoing efforts to optimize its intelligent network
planning and multimodal delivery are expected to help it improve
coverage and manage costs. Yum China
is also making progress on its sustainability goal to transition
its stores and support facilities to use renewable energy.
Recently, its logistics center in Nanning, Guangxi, became the industry's first cold
chain logistics center in China to
be 100% green-powered.
Building an industry-leading sustainable workforce
Yum China's people strategy
centers on building a sustainable and engaged workforce to support the Company's fast
growth. The Company has a robust talent development strategy with
structured training and career paths in place to cultivate top
operational talents. Additionally, the Company offers one of the
leading employee care programs in China, an equity incentive plan for its
eligible Restaurant General Managers, and rewarding experience from
active engagement in community services. Yum China continues to uphold a people-first
philosophy, with "Fair, Care and Pride" as its guiding
principles.
Balanced and systematic capital allocation
In accordance with the previously disclosed 5-year capital
expenditure plan of approximately $5
billion to $6.5 billion
announced during the 2021 Investor Day, Yum
China is earmarking a total capital expenditure of
$3.5 billion to $5 billion over the next three years. These
investments are aimed at growing and refining its store network,
enhancing its supply chain infrastructure and further advancing
digital capabilities. Moreover, the Company will continue its
disciplined approach to strategic investment, focusing on targets
that strengthen core capabilities and improve market positioning.
Yum China is committed to returning
surplus cash to shareholders, with a target to return approximately
$3 billion from 2024 to 2026. This
includes a significant increase in share repurchases and a planned
double-digit increase in dividends.
2023 outlook
The recovery trajectory remains stable despite the near-term
economic headwinds. The Company expects same-store sales to
continue recovering steadily throughout the full year 2023,
maintaining a pace of approximately 90% compared to the 2019
level.
The Company increased its net new stores target for 2023 to
1,400-1,600, compared with its previous target of 1,100-1,300.
Footprint growth is supported by the flexible store formats,
healthy new store payback periods and a strong store pipeline.
Management will continue to implement a disciplined and systematic
approach in new store openings.
The Company maintained its capital expenditures target of
approximately $700 million to
$900 million for 2023.
Webcast Replay and Presentation Materials
A webcast replay of the Investor Day as well as the presentation
materials are available at http://ir.yumchina.com.
Forward-Looking Statements
This press release contains "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. We intend all
forward-looking statements to be covered by the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements generally can be identified by the fact
that they do not relate strictly to historical or current facts and
by the use of forward-looking words such as "expect,"
"expectation," "believe," "anticipate," "may," "could," "intend,"
"belief," "plan," "estimate," "target," "predict," "project,"
"likely," "will," "continue," "should," "forecast," "outlook,"
"commit" or similar terminology. These statements are based on
current estimates and assumptions made by us in light of our
experience and perception of historical trends, current conditions
and expected future developments, as well as other factors that we
believe are appropriate and reasonable under the circumstances, but
there can be no assurance that such estimates and assumptions will
prove to be correct. Forward-looking statements include, without
limitation, statements regarding the future strategies, growth,
business plans, investment, dividend and share repurchase plans,
earnings, performance and returns of Yum
China, anticipated effects of population and macroeconomic
trends, pace of recovery of Yum
China's business, the anticipated effects of our innovation,
digital and delivery capabilities and investments on growth,
beliefs regarding the long-term drivers of Yum China's business and sustainability goals.
Forward-looking statements are not guarantees of performance and
are inherently subject to known and unknown risks and uncertainties
that are difficult to predict and could cause our actual results or
events to differ materially from those indicated by those
statements. We cannot assure you that any of our expectations,
estimates or assumptions will be achieved. The forward-looking
statements included in this press release are only made as of the
date of this press release, and we disclaim any obligation to
publicly update any forward-looking statement to reflect subsequent
events or circumstances, except as required by law. Numerous
factors could cause our actual results or events to differ
materially from those expressed or implied by forward-looking
statements, including, without limitation: whether we are able to
achieve development goals at the times and in the amounts currently
anticipated, if at all, the success of our marketing campaigns and
product innovation, our ability to maintain food safety and quality
control systems, changes in public health conditions, including the
COVID-19 pandemic, our ability to control costs and expenses,
including tax costs, as well as changes in political, economic and
regulatory conditions in China. In
addition, other risks and uncertainties not presently known to us
or that we currently believe to be immaterial could affect the
accuracy of any such forward-looking statements. All
forward-looking statements should be evaluated with the
understanding of their inherent uncertainty. You should consult our
filings with the Securities and Exchange Commission (including the
information set forth under the captions "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" in our Annual Report on Form 10-K and
subsequent Quarterly Reports on Form 10-Q) for additional detail
about factors that could affect our financial and other
results.
About Yum China Holdings, Inc.
Yum China is the largest
restaurant company in China with a
mission to make every life taste beautiful. The Company has over
400,000 employees and operates over 13,000 restaurants under six
brands across 1,900 cities in China. KFC and Pizza Hut are the leading
brands in the quick-service and casual dining restaurant spaces in
China, respectively. Taco Bell
offers innovative Mexican-inspired food. Yum China has also partnered with Lavazza to
develop the Lavazza coffee concept in China. Little Sheep and Huang Ji Huang specialize in Chinese cuisine.
Yum China has a world-class,
digitalized supply chain which includes an extensive network of
logistics centers nationwide and an in-house supply chain
management system. Its strong digital capabilities and loyalty
program enable the Company to reach customers faster and serve them
better. Yum China is a Fortune 500
company with the vision to be the world's most innovative pioneer
in the restaurant industry. For more information, please visit
http://ir.yumchina.com.
Investor Relations Contact:
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Tel: +86 21 2407 7556
/ +852 2267 5801
IR@YumChina.com
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Media Contact:
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Tel: +86 21 2407
7510
Media@YumChina.com
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SOURCE Yum China Holdings, Inc.