Yum China Holdings, Inc. (NYSE:YUMC) stock rose Wednesday after the company reported a strong quarter, driven by solid earnings, revenue growth, and improving margins.
KFC and Pizza Hut fueled the performance through higher delivery demand, steady same-store growth, and continued expansion across new and lower-tier markets.
Quarterly Metrics
The company reported fourth-quarter adjusted earnings per share of 40 cents, beating the analyst consensus estimate of 36 cents. Quarterly sales of $2.823 billion (+9% year over year) outpaced the Street view of $2.721 billion.
Delivery sales increased 34% year over year and represented about 53% of total company sales, up from 42% a year earlier.
Total system sales grew 7% year over year, while same-store sales grew 3% year over year, the third consecutive quarter of growth. Same-store transactions grew 4% year over year.
Yum China Holdings said it opened 587 net new stores, of which franchisees opened 36%.
“KFC has unlocked new consumption occasions through its KCOFFEE cafe and KPRO side-by-side modules. Pizza Hut has enhanced its value-for-money proposition and developed the WOW model to expand into previously untapped locations, especially in lower-tier cities,” said Joey Wat, CEO of Yum China.
Quarterly system sales for KFC grew 8%, while same-store sales increased 3%.
For Pizza Hut, quarterly system sales grew 6% year over year, with same-store sales increasing 1%.
In the quarter under review, the company’s core operating profit grew 23% year over year, while margin was 6.6%, an increase of 80 basis points.
Restaurant margin expanded to 13.0%, up 70 basis points year over year. The improvement was driven mainly by better Food and Paper costs and lower Occupancy and Other Operating expenses.
The firm exited the quarter with $506 million in cash and equivalents.
Dividend
Yum China declared a 21% increase in the cash dividend, raising it to 29 cents per share on the company’s common stock, payable on March 25.
The company said it is on track to return $1.5 billion each year from 2024 to 2026, which is annually around 8% of market capitalization as of February 3, 2026.
Starting in 2027, the company plans to return approximately 100% of annual free cash flow after subsidiaries’ dividend payments to non-controlling interests.
This is anticipated to translate into an average annual return of approximately $900 million to over $1 billion in 2027 and 2028, and to exceed $1 billion in 2028.
Outlook
For 2026, the company expects to surpass 20,000 total stores, adding more than 1,900 net new units, with 40%-50% of net new KFC and Pizza Hut stores franchised.
It also guides for about $600 million-$700 million in capex and $1.5 billion in capital returns to shareholders.
Wat said the company is aiming for more than 30,000 by 2030 through an equity-and-franchise hybrid model, while expanding its addressable market via front-end segmentation and back-end consolidation.
He added that management plans to keep executing its RGM 3.0 strategy, balancing innovation with operational efficiency.
YUMC Price Action: Yum China Holdings shares were up 4.45% at $53.00 during premarket trading on Wednesday. The stock is approaching its 52-week high of $53.99, according to Benzinga Pro data.
Photo by T. Schneider via Shutterstock
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