Yum China's Q1 Earnings & Revenues Miss Estimates, Stock Down

Yum China Holdings, Inc. YUMC reported first-quarter 2025 results, with earnings and revenues missing the Zacks Consensus Estimate. The top line missed the estimate for the fourth straight quarter.

Following the results, shares of the company lost 7.2% during trading hours yesterday. The decline can primarily be attributed to weaker-than-expected results and rational consumer spending. Short-term volatility in the same-store sales is expected to persist.   

YUMC’s Q1 Earnings & Revenue Discussion

Yum China reported adjusted earnings per share (EPS) of 77 cents, which lagged the Zacks Consensus Estimate of 78 cents by 1.3%. The bottom line moved up 8.5% year over year.

Total revenues of $2,981 million missed the consensus mark of $3,111 million. However, the top line increased 1% on a year-over-year basis. Excluding foreign currency translation, revenues increased 2% year over year. (See the Zacks Earnings Calendar to stay ahead of market-making news.)

Total system sales (excluding foreign currency translation) increased 2% year over year. This upside was attributable to the net new unit contribution of 4%. System sales at KFC and Pizza Hut increased 3% and 2% (excluding foreign currency translation), respectively, year over year.

During the quarter, YUMC's same-store sales reached 100% of the previous year's level. Also, same-store transactions grew 6% on a year-over-year basis.

Operating Highlights of YUMC

During the first quarter, total costs and expenses amounted to $2.58 billion, flat year over year. We expected the metric at $2.71 billion.

The restaurant margin was 18.6%, up 100 basis points year over year. We estimated the metric at 17.8%.

Adjusted operating profit totaled $399 million compared with $374 million a year ago. Our estimate for the metric was $403.1 million.

Adjusted net income amounted to $292 million compared with $287 million reported in the prior-year quarter. Our estimate for the metric was $296 million.

YUMC’s Balance Sheet

As of March 31, 2025, Yum China’s cash and cash equivalents were $825 million compared with $723 million as of Dec. 31, 2024. Net inventories were $329 million compared with $405 million as of Dec. 31, 2024.

The company plans to return a total of $3 billion to its shareholders between 2025 and 2026, building on the $1.5 billion already returned in 2024.
In the first quarter of 2025, the company returned $262 million to its shareholders, consisting of $172 million in share repurchases and $90 million in cash dividends. During the quarter, 3.6 million shares of common stock were repurchased.

As of March 31, 2025, roughly $1.1 billion remained available for future share repurchases under the existing authorization.

YUMC’s Unit Development & Other Updates

In the first quarter, Yum China opened 247 net new stores. As of March 31, the total restaurant count reached 16,642.

Its delivery contributed approximately 42% to KFC and Pizza Hut's company sales. Digital orders contributed about 93% to the total company sales.

Yum China expects the proportion of net new franchised stores to steadily rise in the coming years, reaching 40-50% for KFC and 20-30% for Pizza Hut.

2025 Outlook of YUMC

Yum China continues to expect net new store openings to be in the range of 1,600-1,800. Management continues to predict capital expenditures to be between $700 million and $800 million.

YUMC’s Zacks Rank

Yum China currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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