Yum! Brands (NYSE:YUM) Q3 2025 Earnings Call November 04, 2025 08:15 AM ET Company ParticipantsChris Turner - CEORanjith Roy - CFOMatt Morris - Head of Investor RelationsConference Call ParticipantsDavid Palmer - AnalystDanilo Gargiulo - AnalystChristine Cho - AnalystChris Brennan - AnalystBrian Bittner - AnalystJeffrey Bernstein - AnalystAndrew Charles - AnalystJohn Ivankoe - AnalystDennis Geiger - AnalystOperatorHello everyone, and thank you for joining us today for the Yum! Brands 2025 third quarter earn ...

Yum! Brands (NYSE:YUM) Q3 2025 Earnings Call November 04, 2025 08:15 AM ET Company ParticipantsChris Turner - CEORanjith Roy - CFOMatt Morris - Head of Investor RelationsConference Call ParticipantsBrian Bittner - AnalystDavid Palmer - AnalystDanilo Gargiulo - AnalystChristine Cho - AnalystChris Brennan - AnalystJeffrey Bernstein - AnalystAndrew Charles - AnalystJohn Ivankoe - AnalystDennis Geiger - AnalystOperatorHello everyone, and thank you for joining us today for the Yum!! Brands 2025 third quarter ear ...

Yum! Brands (NYSE:YUM) Q3 2025 Earnings Call November 04, 2025 08:15 AM ET Speaker1Hello everyone, and thank you for joining us today for the Yum! Brands 2025 third quarter earnings call. My name is Sammy, and I'll be coordinating your call today. During the presentation, you can register a question by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by two on your telephone keypad to remove yourself from the question queue. We ask that you limit yo ...

Financial Data and Key Metrics Changes - System sales grew 4% year-over-year, outpacing the China restaurant industry, while same-store sales grew for the second consecutive quarter [4][12] - Restaurant margin expanded to 17.3%, contributing to an 8% year-over-year increase in operating profit to $400 million, a record for adjusted operating profit in quarter three [4][14] - Net income was $282 million, down 5% year-over-year, but grew 7% year-over-year when excluding the investment in Meituan [14][15] Business Line Data and Key Metrics Changes - KFC opened a record 402 net new stores, with system sales growing 5% and same-store sales growing 2% [10][12] - Pizza Hut surpassed the 4,000-store milestone, with system sales growth improving sequentially from 2% in Q1 to 4% in Q3, and same-store sales growth of 1% driven by 17% same-store transaction growth [12][18] - K-Coffee Café expanded to 1,800 locations, with daily cups sold per store increasing 30% year-over-year [10] Market Data and Key Metrics Changes - Delivery sales accounted for 51% of total sales, up from 40% in the same quarter last year, indicating a shift in consumer purchasing behavior [9] - Lower-tier cities performed slightly better due to greater domestic travel, reflecting a trend in consumer spending [32] Company Strategy and Development Direction - The company is focused on a multi-brand portfolio and operational efficiency, leveraging synergies across brands to drive growth [19][20] - The LGM strategy (Resilience, Growth, Moat) continues to guide the company's operations and expansion plans [21] - The company aims to reach 20,000 stores by the end of 2026, with a commitment to return approximately $1.5 billion to shareholders annually from 2024 to 2026 [5][16] Management's Comments on Operating Environment and Future Outlook - Management noted that while the environment remains challenging, they are optimistic about maintaining mid-single-digit system sales growth and improving margins [17][18] - The company is committed to menu innovation and operational efficiency to navigate the competitive landscape and consumer price sensitivity [32][33] Other Important Information - The company plans to continue its focus on new growth drivers, including K-Pro and K-Coffee, which are designed to capture different customer segments [19][51] - The company is on track for 1,600-1,800 net new stores in 2025, with a capital expenditure target of $600 million-$700 million [16][17] Q&A Session Summary Question: Delivery platform subsidy impact and competitive landscape - Management observed a decrease in subsidies in coffee and tea but only a slight decrease in QSL, expecting limited impact on the company [26] - Long-term, management believes subsidies will normalize, emphasizing the importance of menu innovation and food quality [26] Question: Macro perspective on the restaurant industry in China - Management noted good performance in Q3, with lower-tier cities performing slightly better due to domestic travel, while consumers remain value-cautious [32][33] Question: Expansion strategy focusing on smaller formats and franchise stores - Management indicated that the ratio of system sales growth to store count growth may not remain constant due to strategic optimizations and timing of openings [35][36] Question: Delivery order mix and membership sales - Management clarified that the decrease in membership sales contribution is a mechanical result of increased aggregator orders, and they are working on improving delivery efficiency [42][43] Question: KFC business operating leverage - Management acknowledged that the increase in delivery mix has created headwinds for operating leverage but remains committed to maintaining stable restaurant margins [56] Question: Sustainability of KFC's same-store sales growth - Management expressed optimism about maintaining similar same-store sales growth levels, emphasizing the importance of transaction growth [60][61]