Financial Data and Key Metrics - Total revenue declined 9% YoY in reported currency to 2.1billioninQ42022,butgrew2734 million, with 668millionreturnedtoshareholdersthroughdividendsandsharerepurchases[23]−Cashandshort−terminvestmentsdecreasedto3.2 billion from 4billioninQ32022,mainlyduetoreclassificationof600 million to long-term deposits [23] Business Line Performance - KFC same-store sales were 97% of prior year levels in Q4 2022, with same-store traffic at 84% and ticket average up 16% due to higher delivery mix [19] - Pizza Hut same-store sales were 92% of prior year levels, with same-store traffic at 98% and ticket average at 95% [19] - Delivery sales mix doubled from 20% in 2019 to 39% in 2022, with off-premise sales reaching almost two-thirds of total sales in Q4 2022 [5] - Digital ordering increased from 55% of sales in 2019 to 89% in 2022, generating over 20billionindigitalsalesoverthreeyears[6]−Packagedfoodsalesgrew90700 million to 900million[26]−Focusondrivingsalesthroughproductinnovation,valuepromotions,anddigitalinitiatives,whilemaintainingdisciplinedstoreexpansion[52][53]−Continuedinvestmentinsupplychain,digital,andautomationtoenhanceoperationalefficiencyandresilience[7][81]−Thecompanyremainscommittedtoreturningcapitaltoshareholders,witharaisedcashdividendfrom0.12 to 0.13pershare[27]ManagementCommentaryonOperatingEnvironmentandFutureOutlook−ThecompanyfacedsignificantchallengesinQ42022duetoCOVID−relatedlaborshortagesandtemporarystoreclosures,butmanagedtoimproverestaurantmarginsdespitelowersales[17][19]−Managementiscautiouslyoptimisticabouttherecoveryin2023,butexpectsittobegradualandunevenduetomacroeconomicuncertaintiesandcautiousconsumerspending[25][45]−Thecompanyplanstofocusondrivingsalesgrowthwhilemaintainingoperationalefficiencyandcostcontrol[25][53]OtherImportantInformation−Thecompanyhostedits2023InvestorDayinShanghaiinSeptember,withplanstosharemoredetailsabouttheevent[4]−Thecompanyhasmaintainedprofitabilityeveryquartersincethestartofthepandemicin2020,generating1.9 billion in free cash flow and returning over $1 billion to shareholders [8] Q&A Session Summary Question: New store performance and margins post-COVID [30] - New stores opened during the pandemic have shown strong performance, with KFC stores breaking even within three months and Pizza Hut stores achieving a payback period of two to three years [31][32] - The company has focused on smaller store formats and flexible rent terms, reducing CapEx per store and improving unit economics [33][36] Question: Restaurant margin recovery potential in 2023 [41] - Management expects restaurant margins to improve with sales recovery, but cautions that inflationary pressures and the end of temporary relief measures could impact margins [43][44] - Cost of sales and labor are expected to remain stable, with a focus on reducing occupancy and other operating expenses [46][47] Question: Competitive landscape and promotion strategy [58] - The company has gained market share during the pandemic and plans to continue driving sales through effective promotions and product innovation [59][60] - Pricing strategy includes a mix of lower entry-point products and high-end offerings to cater to different customer segments [61] Question: Recovery pace for KFC and Pizza Hut [63] - KFC performed slightly better than Pizza Hut during the Chinese New Year period, with off-premise sales playing a key role in protecting margins [64][67] - Pizza Hut is focusing on increasing store count and improving resiliency through satellite and smaller store formats [70][72] Question: Regional recovery differences [74] - Recovery has been strong across regions, with lower-tier cities performing better during the Chinese New Year period [75] - Management remains cautious about post-holiday consumer spending and plans to focus on value promotions to drive traffic [76] Question: Supply chain and ESG initiatives [80] - The company plans to continue investing in supply chain infrastructure and automation, with a focus on reducing carbon footprint and working with suppliers to achieve net-zero emissions by 2050 [81][82] - Supply chain innovations, such as the use of rail and sea freight, have improved resilience during disruptions [86] Question: New store opening targets for 2023 [88] - The company plans to open 1,100 to 1,300 new stores in 2023, with a focus on quality of growth over quantity [89][90] - Store expansion will depend on market conditions and unit economics, with a disciplined approach to investment [91]