Yum China Holdings, which operates KFC and Pizza Hut locations across mainland China, announced a 14% increase in profit during the second quarter compared to the previous year. This marks the ninth consecutive quarter of growth in earnings and profit margins.
For the three months ending June 30, net income reached $244 million. Operating profit also rose by 14%, hitting a record high for a second quarter at $348 million, driven by a 13% increase in revenue to $3.1 billion. Diluted earnings per share advanced 21%, reaching 70 cents.
“Our second quarter results were strong,” said the CEO during the earnings call. “For the ninth straight quarter, we have seen growth in system sales, operating profit, and profit margins simultaneously.”
Same-store sales saw a modest 1% increase, improving upon the first quarter, supported by 14 consecutive quarters of growth. The company added a net 560 new stores this quarter, a record for a second quarter and a 67% rise from the same period last year, increasing total locations to 19,297.
Delivery sales surged 26%, now representing approximately 54% of total sales, up from 45% a year earlier. The CFO acknowledged that rider costs continued to rise year-over-year in the second quarter, reducing margins by 140 basis points. However, the company managed to offset most of this impact through improved store operations. Restaurant margins remained steady at 16.1%.
Shares trading in Hong Kong closed 1.9% higher at HKD 372.80 (roughly USD 47.53) each. In New York, the stock increased 1.4% yesterday, ending at USD 46.47.
Pizza Hut continued its positive momentum, with same-store sales returning to growth at 1%. The number of new store openings nearly doubled compared to a year ago, reaching 174. Additionally, the new made-to-order Burger Bar concept expanded to over 200 locations in just six months.
When asked if the burger initiative risked cannibalizing pizza sales, the CEO stated the product needed to be distinctive. He added that early results show double-digit sales growth for parent stores and healthy profit margins.
The company’s acquisition of the Pizza Hut brand in China, ending a 36-year licensing arrangement, is expected to close in August. The ownership will enable faster and more decisive action, bypassing previous behind-the-scenes negotiations.
The firm increased its target for net new Pizza Hut stores for next year and 2028 to over 800 annually, up from more than 600 previously.
Looking ahead, the CEO expressed positivity about the retail sales rebound in June and noted that competition among delivery platforms has become more rational. The company reaffirmed annual goals of mid-to-high single-digit growth in system sales and double-digit increases in earnings per share, aiming to expand its store count beyond 20,000 by year-end.
In the quarter, the company returned $402 million to shareholders through share buybacks and dividends, with plans to distribute approximately $1.5 billion this year—about 10% of its current market capitalization.