Zacks Investment Researchยท2024-04-30 15:56Core Insights - Yum China Holdings, Inc. (YUMC) reported strong first-quarter 2024 results, with earnings and revenues exceeding expectations, driven by robust system sales growth and new unit contributions [1][2] Earnings & Revenue Discussion - Adjusted earnings per share (EPS) for Q1 2024 were 71 cents, surpassing the Zacks Consensus Estimate of 66 cents, and up 2.9% from 69 cents a year ago [2] - Quarterly revenues reached $2.96 billion, exceeding the consensus mark of $2.94 billion, and increased by 1% year-over-year; excluding foreign currency translation, revenues grew by 7% [2] - Total system sales rose by 6% year-over-year, attributed to an 8% contribution from net new units; KFC and Pizza Hut system sales increased by 7% and 4%, respectively, excluding foreign currency translation [2] - Same-store sales reached 97% of the previous year's level, despite strong performance in the same period last year [2] Operating Highlights - Total costs and expenses for Q1 2024 were $2.6 billion, up from $2.5 billion in the prior-year quarter [3] - Restaurant margin decreased to 17.6% from 20.3% a year ago, impacted by increased value-for-money offerings and wage inflation, partially offset by favorable commodity prices [3] - Adjusted operating profit was $374 million, down from $419 million a year ago; adjusted net income was $287 million compared to $292 million in the prior-year quarter [3] Balance Sheet - As of March 31, cash and cash equivalents were $883 million, down from $1.13 billion as of December 31, 2023; inventories were $345 million compared to $424 million [4] - In Q1, Yum China repurchased nearly 16.6 million shares for $681 million, with $853 million remaining for the buyback program [4] - A quarterly cash dividend of 16 cents per common share was declared, payable on June 18 to shareholders of record as of May 28 [4] Unit Development and Other Updates - Yum China opened 378 net new stores in Q1 2024, bringing the total restaurant count to 15,022 [5] - Delivery contributed 39% to KFC and 37% to Pizza Hut's company sales; digital orders accounted for 89% of company sales, consistent with the previous year's levels [5] - Loyalty programs for KFC and Pizza Hut saw membership growth, increasing to over 485 million [5] 2024 Outlook - Yum China projects 1,500-1,700 new store openings in 2024, with capital expenditures expected to be between $700-$850 million [6]