Yum China swings to Q4 loss

by Erica Shaffer
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SHANGHAI – Shares of Yum China Holdings Inc. fell Feb. 7 after the company reported a fourth quarter net loss of $90 million related to a one-time charge related to US tax reform.

For the fourth quarter ended Dec. 31, 2017, Yum China reported an estimated one-time tax charge of $164 million, or $0.42 per share. Excluding this impact, adjusted net income for the quarter was $74 million, or $0.19.

Total revenues for the quarter were $2.2 billion, an increase of 13 percent. Same-store sales climbed 5 percent, with an increase of 7 percent at KFC and 1 percent at Pizza Hut.

Micky Pant, CEO of Yum China, said in a statement that “2017 marks the first full year of Yum China as an independently listed company and we are pleased with high single-digit system sales growth and double-digit operating profit growth.

“Our development team has again exceeded expectations in opening 691 new restaurants in 2017,” Pant said. “I am very pleased to hand over the reins to Joey Wat as our new CEO from March 1; she has demonstrated an excellent track record and is the right person leading Yum China as we head into 2018, with challenging sales and profit laps particularly in the first half of the year.”

Full-year results included same store sales growth of 4 percent, with an increase of 5 percent at KFC and 1 percent at Pizza Hut.

Net Income for the year totaled $403 million, down 20 percent. Adjusted net income was $564 million, an increase of 20 percent, (or 24 percent excluding F/X) excluding special items.

Operating profit advanced 23 percent to $785 million. Excluding special items, adjusted operating profit was $782 million, an increase of 20 percent (23 percent, excluding F/X) driven by strong sales and margin expansion.

Total revenues advanced 6 percent (8 percent excluding F/X) to $7.1 billion.

“All of us at Yum China are committed to building leading brands for the long term through innovation,” said Joey Wat, president and COO. “We will focus on our strategic priorities on digital and delivery, while continuing to improve our food and in-store experience. While we finished 2017 with a solid sales momentum, we continue to face challenges of the revitalization of Pizza Hut and lapping of two very successful Chinese New Year promotions. However, I remain confident in the growth opportunities and long-term prospects of Yum China.”

Yum China reported its loyalty program members increased to more than 110 million for KFC and more than 35 million for Pizza Hut by the end of 2017.

Mobile payments accounted for about 53 percent of company sales during the fourth quarter of 2017, while delivery contributed to 14 percent of company sales for 2017.

The company opened 339 new restaurants in the fourth quarter and 691 new restaurants for the year, led by the KFC brand. Also during the fourth quarter, Yum China remodeled 359 restaurants for a total of 788 remodeled restaurants (mostly KFC units) for the full year. 

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