Yum China (YUMC) 7 Feb 232022 Q4 Earnings call transcript

Thank you all for standing by and welcome to the Yum China Fourth Quarter and Fiscal Year 2022 Earnings Conference Call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions]

I'd now like to hand the conference over to your first speaker, Ms. Director. IR, Shen, Michelle ahead. go Please

CFO, you, Zari. China's today's for Yum and Thank are Hello quarter XXXX everyone. our Wat; fourth Joey On CEO, you Andy Earnings Yeung. our joining Ms. Thank Mr. Conference call Call.

like get statements, that forward-looking our remind we subject are to and Before and to materials uncertainties. call investor you I'd started, contain which earnings future events

conjunction these with materially in forward-looking may SEC. cautionary risk Our differ from be these considered -- the should actual our in All statements. our in from the forward-looking statement the and earnings statements results statements filings release with included factors

call This certain measures. financial also includes non-GAAP

consider and comparable included earnings is should measures. Reconciliation our the GAAP carefully measures of non-GAAP in You GAAP release.

will past in our quarter detail. Joey talk financial discuss cover fourth greater Today's about three Andy and and call the will then performance performance. the three journey years in includes outlook sections.

questions. the Finally, to we open will call

presentation, You can operational webcast call highlights of and this find a the our website. which financial contains on IR PowerPoint and

our to due sharing through to Shanghai We Finally, this September. we in Day forward XXXX details with Investor you look course. about event in more plan host

to Now, China. turn to would call Joey the Yum I CEO Wat, of Joey? over like Ms.

everyone Thank Chinse a New you, joining Year. to Michelle. I happy want wish today us and healthy

how these and Before three learnings years and fourth like some have full journey our quarter upon looking key our past the to with at year, grown. I reflect would of COVID, we

long-term nimble business, tenacity First, a resilient, we this positioned Together, I'm for for difficult became China team their agility, incredibly to during growth. creativity, and Yum grateful the entire more better time.

came sales pivoted Delivery XXXX quickly XX% mix after pressure. XX% XXXX. from During the doubled past three we in when to in just buying years, traffic

quarter Combined model delivery enable XXXX. to in and in sales increase almost two-thirds the demand. takeaway, hybrid off-premise reached dedicated the of us with fourth Our capture riders

in digital $XX That's Digital XXXX in three our rapid to ordering XX%. in XX% from rocketed maintained billion now years. growth. sales also over We of sales

KFC Our Hut to store maintained total healthy a stores. a and Pizza nearly net new respectively. two by portfolio stores of expanded XX%, three years, of X,XXX payback

stores size The new more model. store secured was also terms. favorable improved. first store driven of We lease profitability our by performance and optimized flexible year store new Strong

For more new stores opened in allow lower-tier half for in in flexibility cities, to in which formats. white to capture Such and delivery is increase useful than were continue particularly XXXX, higher-tier smaller us and density helpful cities. space

for XX We of to supply logistics XX and centers enhanced in each business province. to agility world-class our better chain expand We support coverage self-sufficiency from the growth.

we lockdowns, During to freight expanded trucks. add apart rail and our traditional move sea inventory our from

from our improve we offers scale. innovation visibility product sales We even store disruption over year classic launches. and supported to allows last These wastage. transparency during Apart XXX automation capabilities smart [Technical supply or by invest from mitigate at regional launched to minimize Difficulty] Our securing digital forecasting and real-time also help a new inventory offerings, in efficiency. items severe and upgraded and operating replenishment. lockdown inventory system menu national

Pizza order demand smart reduce also wastage, at AI-powered time accurately KFC. food more system out and waiting system, rolling are wait experience to [Foreign our for service robotic and time and predict And real-time to we plan freeing one-third example, Language] crews a restaurants, For outs stock preparation enhances It Language] minimize recommend The customers. at customers. also customer reducing Hut recently, update. added serve by our we and order [Foreign providing of

In the the volatile the market pandemic since created of beginning jobs profitable we past billion and able the Notably, say structure shocks I'm we XXXX. three did cushion rebasing every US$X over quarter also By the employees. returned in our implementing to billion cash in austerity were each free proud cost of generate situation. and protecting We we and to remain measures, by years, to shareholders. US$X.X this flow while

pandemic had the layoff since We staff no have began.

we period, improve to times. this to over back bad see our good opportunities Looking ability times operate and in

us China. operations drive Looking shine long-term will forward, growth in to enable and our anti-fragile

me quarter restrictions. and unprecedented built the just lifting sporadic highlights fourth full managed some infection months, nationwide COVID entire with for of let year. Now the was outbreaks, lockdowns, provide city we XX In XXXX certain challenges. COVID-related and

stores COVID evolved In December, October measures. and as November, significant to tightened opt a China to Many or our were major a our in phase to labor leading face COVID-related stay temporarily shortage. riders entered only new regional employees Thousands Buying infection resulting limited new traffic rates, challenges. recover brand or portion avoid symptoms. fell home In from became With COVID closed of of provided into infection services. sharply. and response, quickly we infected, a also surging outbreaks, residents of infection

the and this employees our talk always, our organize all During with as for health priority. testing time, remain safety we hotline relief We daily We kits. antigen and minimize employees. the a riders support medicines consultation customers of test employees health moved mandate informative crews and for to and top and quickly and and infections, our our

delivery crew up time, the steps stores pick shortage. with packaged the customers resources demand, promote to among We and same and took address orders food labor hours encourage shortened optimized to shifts. menu, simplified immediate operations, we labor At We products. stronger stores, and operating adjusted the we reallocated prioritizing

thankful substantial open execution. extensive net full by scenario sales. year. X,XXX achieved I'm nimble or a efficiency improvement, quarter expansion in stores stores our relief. for rebasing We lower fourth was the new operational in challenging margin cost and Even the actions planning, XXX net able temporary initiatives new despite also in were record to year-over-year quarter, restaurant our This delivered team's we amazing this and

our campaigns Let's move on solid X% of At we KFC sales Original introduce [Foreign KFC, Juicy around delight to momentum. categories chicken, in generate whole By beef burger, quarter, to [Foreign fourth Hut chicken. our XXXX. the the Language] and doubled delicious grew Pizza mix Recipe brand, KFC sales to and in new in to nearly equal exciting Language], brand. food and Combined, continue customers. with

Spicy categories, during introduce We Chicken, to flavors Language], Chinese continued Whole [Foreign the New more in launched as Year. such these

of Following Psyduck and [Foreign social toys customers Chicken [Foreign huge quarter in popular quickly These Fluffy [Foreign toys but generated our with both fourth were traffic. or Fancy the Language], the buzz. also and Language] quarter two, designed for pet Popcorn, Chicken, in Pokemon include Language], became drove very pet, toys your as all originally success

pizzas. nicely We second. million XX% like pizzas new Apart grew fillings pizzas meat At trade and pan-tossed seven floss, cheese, per the lift Pizza year, that's double and price. over our signature XXXX, sales Hut, of XXX choose effective crispy These sold Customers pizzas, nearly Rousong. we from have pizza reaching sausage encourage for stuffed-crust the almost launches can and added up sales. in

We value stunning to continue money. for offer

weekdays. XX% signature generating Thursdays other Our campaign value sales. KFC, sizable Save sales Language] make compared love to Buy the math excellent the attract weekend More at with discount. and the option over Customers more Thursday, spur continues [Foreign traffic, on More Crazy [Foreign Sunday, Language], to

uplift. At drove Pizza The popular wildly amazing Hut, XX in and we brought traffic CNY back value for sales promotion two great the November. pizza

In lockdown New XXXX, retail nearly million. we and when staff. us provide packaged of CNY reached short during and flexibility grew XXX packaged XX% foods food sales were

and offerings, [Foreign egg continue broaden Popcorn the Language] Chicken to classics our some such of We adding tart as our

our Now to emerging moving brands. on

and management teams solid We in strategies place. have

we milk, business test development. -- fine-tune four-pillar and digital new making execute includes Throughout are the take Lavazza store While to coffers menu introduced and innovation, brand it [Foreign to strategy, will such and buffalo orange continues buffalo we time its with the year, flavors as model, which latte building, Language]. delivery, solid

We pair coffee, and is Language]. sweet well also savory Cube that food which introduced would Cornetto, such [Foreign fluffy, a with as

continue contributing We X enhanced lowering to over than million efficiency in investment. Loyalty double XX% optimize operational sales. -- new members upfront store XXXX, more to and designs, of

XX openings, stores disruptions four. COVID of the by quarter have delayed Although end store reached Lavazza

its in Taco XXXX to stores. count XX store Bell doubled

We menu continue localize Chinese to for the customers.

their one-time a unit continue Sheep We supply digital marketing, economics. expectedly Ji in from generate place to value example, a impact duck Why Huang one-time their Little the proposition, a due taco, by customer to and use We to tortilla. dine-in Huang profit. [Foreign fundamentals COVID For initiatives. models Huang continued Ji models, strengthen menu, operating wrapper used refine business XXXX crispy also of and were not? store experience chain and improve to focus. to also Huang Language], and

efficiency To momentum positive and with XXXX, opening operational a in sales. in capture the chapter season. We see wrap Year up, excited new action we ensure to to New took decisive Chinese are

how our and by At during part game. celebration broadband our signature introduced holiday food a wagyu [Foreign in an the At a play popular with pizza [Foreign favorite. Language], our Pizza seafood. Hut, to KFC, which Golden is It's gratifying It's see called a Language], inspired which holiday. holiday-themed we we beef important is delicious Bucket, customers'

reality, Yet including COVID consumer spending remains and a the cautious ahead, challenges lay many through holiday. still

While we and to brighter anticipate I'm ahead. recovery the will be road optimistic uneven, are days that gradual

to capture opportunity We to the shareholder strategic execute deliver growth which continue stand growth, our RGM and mode, for proven resiliency, will value. strategy, and

will over Andy? call the I that, turn With Andy. to

belated Joey you, New and Thank Happy everyone. Chinese to Year

with share performance. me you fourth Let quarter our

as and related an faced extremely fourth challenging policies. and mentioned, COVID Joey there substantial As changes quarter fluid we conditions in were

a only and November, services, infections were late takeaway peak that health stores offer either strict measures, temporarily or rising over of delivery In X,XXX number of due COVID-related reached stores. the to closed and

of most shortage, measures X,XXX where provide the services situation labor different to over had at a on faced were limited COVID temporarily we we December, Due to average. close or In lifted. stores

and despite lower demand. we In Furthermore, environment, quickly such off-premise to a vital costs, product wastage, action sales. enhanced capture controlled we limited took

job percentage margins almost very Our points team circumstances. by difficult wonderful did despite a improving three restaurant

exchange. through are Let effect before otherwise, changes Unless the the percentage financials. go us of all noted foreign now

exchange impact quarter. the Foreign approximately negative of had XX% a in

revenue partially $X.X X% constant of grew revenues contribution in reported KFC same-store sales quarter by The store decline billion. units temporary declined the currency, Hangzhou of new offset total X%. consolidation In year-over-year currency and closures. were to total Fourth and

XX% level, has sales prior with rise same-store a in traffic due X% declined the sales System dine-in. grew than higher ticket of average XX%. By year's sales and same-store KFC mix, year-over-year. the average to XX% were brand, Ticket which delivery at same-store both

sales XX%, average prior same-store pandemic. average orders of to of year ticket was the driven lower XX% at traffic were XX%. by delivery smaller Hut and at due Same-store sites Pizza level. Ticket party was

higher delivery store partially the was efficiency prior by increase to well than includes as operational points volume. temporary costs relief. sales These was driven the basis margin year. and XX.X%, rider high which leveraging mainly productivity, temporary as due year-over-year impact, The by closures, XXX labor offset Restaurant were higher

We labor costs. inflationary headwinds faced also commodity in and

which profits. Our in team of terms the protect during and seasonally is slow quarter, hard margins to fourth worked sales

kept We took. by commodity inflation and XX key basis through actions items innovating was lower menu. and sales prior the me highlight XX.X%, the prices go Let in we the year. modest points locking relatively Cost strategically than of

We promotional also carefully planned activities reduced wastage. and

was sales million. Cost XX cost This year. rider increased was to relief by higher productivities was of low sales single-digit basis XX.X%, $XX higher labor of wage temporary mix, points prior inflation leveraging. offset better mainly labor due and partially from This and delivery than

Occupancy as and a benefited percentage than lease and and basis more expense deleveraging. other This of due was portfolio rental sales relief initiatives. XX.X%, was other of lower lower sales, despite strong optimization rental year expense, prior XXX cost-saving million, from to terms. $XX points favorable mainly Rental

mainly well partially consolidation KFC. expenses, G&A benefit as offset Hangzhou to due and by expenses X% was initiatives. compensations of year-over-year, increased cost increase the control The as increased

increased In to $XXX from the non-cash the held recorded $XX remeasurement of KFC. By compared excluding Operating in $XXX million. the million $XX Hangzhou in million period. million gain, fourth remeasurement quarter from XXX% of profit adjusted we a equity of previously year our interest $XX gain year-over-year profit XXXX, to million operating was

operating roughly the was contribution acquired, quarter from The net $XX assets of included XX% consolidation profits the of of was amortization million. Hangzhou We quarter. intangible KFC’s last in which

tax, JVs tax basis was prior not Hangzhou equity tax consolidation. points to XXX a Prior due and income higher pre-tax XX.X%, year, rate. in subject resulting rate was Effective to from KFC to lower income the lower than consolidations,

million. $XX $XX Net net million. income Adjusted was was income

our $X net in million $X quarter the adjusted the equity income the gain in XXX%. investment and net mark-to-market grew net million prior year Meituan Excluding on in period, the loss

at were value to gain EPS Meituan in by the $X.XX. increased Due the and mark-to-market diluted EPS adjusted EPS $X.XX,

in Suzhou $XXX ownership from for XX% acquired December, This stake our million. In JV total an XX% in KFC XX%. additional increased approximately to the JV we

$XXX in of full the shareholders For cash returned cash $XXX million generated we and roughly XXXX, year flow free million. repurchases. share dividends to We

reclassification short-term from Cash, investments to reduction We billion, from of cash investments long-term and to around billion invested and short-term deposits $X.X down third bank rates. $X better was time short-term interest in in due to was $XXX benefit from the investments cash mainly quarter. in the long-term deposits. The million

Let's XXXX. the temporary for now turn resumed services. of normal most to closed In our outlook January, stores

holiday as the policy comparable Our coincided mid below but sales the up Year the from Chinese sales benefited same-store remained year-over-year, Same-store Chinese pent-up demand level. single-digits compared season New relaxation the Year with of COVID New from were holiday.

real test holiday, customer as more and after the be face sales macroeconomic the cautious trajectory However, spending will the uncertainties. we

ahead, Looking and the new recognize still future looks ahead. challenges we encouraged a keep level by and we COVID bright. The lie are But policy. that head indeed uncertainties must

COVID has in the shown pass that country Our COVID will are emergence outbreaks new variants after further of restrictions lifted.

in factors spending may commodity China. wage elevated our inflation also as macroeconomic global and These economic softening operations well as such We consumer conditions. impact headwinds and face as

risk broken and and take to non-linear uneven. we Now of a record, expect recovery like be to continue the at sounding time

XXXX, remain time, to drive is same we steps. the agile. top priority At For our will

of we both of One risks on opportunities the when to recent planning capitalize the lessons growth years in the is preparing learned needed. to of range mitigate scenario, a importance wide and for and

development, we open to X,XXX X,XXX to store On stores. new targeting are

$XXX expenditure supply support to development. of million to We and infrastructure digital, organic other remodeling, expect $XXX million capital growth chain

the what not quality the to the just always, growth quantity. matters most, As is of us

So approach disciplined we our investment will systematic continue and to growth. and

healthy committed share and supported Board to balance returning the per shareholders. Finally, our strong approved has This cash to $X.XX sheet to we remain cash is capital from The $X.XX by share. flow. dividend per to raise

will that, to Michelle? the back you start Q&A. With I to pass Michelle

questions Andy. now to Sari, a to people one In order questions. We'll to the the time. to ask Thanks, open your at start for please please call give more chance limit questions, Q&A.

Instructions] & go question Thank Company. from [Operator comes Please Bittner first from Brian you. Your ahead. Oppenheimer

you've stores began. Thank question that new you. is morning you. since built My to Good on COVID the

three new in a about You've the forward? talk built a where sales the have which over these I very years, so COVID it of can you stores to of kind Andy, of payback stores the new incredibly amount can model understand the where been productivity the stands of X,XXX built asset significant of on to class operating the these margins impressive. that the And on over we still are rest despite about and currently base, since know moving this last relative stores stores. think pandemic, But strong is how

increased Thank you, by mentioned, we period if store performance, think the payback you consistent, our nevertheless, And look the look three Brian. but been I good. If at right? opening almost almost have very the we for past store count has new – years, at very store XX%, as opening were our – Joey

the is is to have, years for the new years. KFC, on model, KFC, Hut KFC, the – Hut, with it's years is which which par For two – Pizza three about why a it's to sorry, that two because two model Pizza about performance you about go about reason it's and years, it's two or if satellite for years. three for And we three

even of the bit And a then period they're more three if new obviously, very recently, this environment. for look year, to and them with look And of store – standard the payback at economics there's year breakeven months most opened, is challenging that unit If well. perform longer. at we their continue store within breakeven their models, – that overall opened last you we very are this little the time

the new space. And penetration we our especially KFCs, need or of services. then with if convenience increase did past over increase existing urban in difference density years, takeaway model the the with lower satellite white and the for you So that where also at smaller cater couple portfolio, store is is demand area, the KFC smaller look model, model. in consumers' We we to and to delivery store

new The are store smaller. January

existing of portfolio, are two-third generally, portfolio than sales the less about average. sales So the the throughput, their competitive throughput, roughly

of the better. are those new probability Now stores

As lower have step-up small for the we we investment mentioned, store.

for store properly, at about new If spent look million opening. you probably $X.X our we it

we small RMB then now are close then on million it's X.X model, And like to average RMB and the for about X million. spending

– then obviously also, and pandemic. efficiencies have improved throughout we And the so this

at the restaurant year despite especially As to last look throughout example, in market year the and for margin, the leveraging, XXXX, margins, you environment we managed – restaurant fair at KFC. sales improve

and a store -- pace resources confident to network payback the so pretty we have very So our our right I format at think healthy also and robust for maintain investment. a we're grow that

store while here store, some the we the to just to stores new what last -- openings how actually net have have theme your many X,XXX also of same question. retired. X,XXX because At but many talk growth emphasize I'll many about in is how years, time, add growth how Brian, aggressive -- the color resiliency opened we did not store. we The three we but new new important stores

the new open we, productive improved the China And our we Yum in of for same retire time, assets the quality the assets. when more productive the at three has last So store, less years. thus,

just highlight So a bit have here. of

-- talk of XX% more right we And you resilient. make about the XX% which stores store cost. our is new rent, the new we think have about more, some if move are we about roughly have For we store CapEx equipment, XX% lower can us open now, around; CapEx, flexible which in talking the XX-XX. even

some of just of cost is So even reduction CapEx. terms the the of more the reduction the than CapEx in total

is smaller. size the And

about and city store of better And the both too, productivity matter, it's of location in the stores spread, too. new they're lower the tier actually. tier the XX-XX So is city, higher because

entering they're effective city, lower-tier new -- in cities. are very, very new for XX% So stores

white can pretty you And And XXX entered XXXX, it's we are For actually to grow. imagine, these cities. space. good market new KFC, a

increase For high-tier density business. store you higher-tier which or distance focus in between the the focus think is of cities, our on gap important delivery to city, incredibly our the stores our if on filling about the our is

of in that business. you. flavor you hope that the stores gives in of terms the some terms Thank I new for So resiliency and about the quality

Thank you much. so

you. Thank

Luo next of go Your America. Bank Please Chen from comes from question ahead.

and New Joey Happy Chinese you, Andy. Year. Thank

raise I'd may. highlight like So before if to I my I three question, things,

level. single-digit XX quarters, better pre-pandemic First, quarters the quarters, that we QX to like of restaurant we over have for for decline more four margins fact reported XXXX. the the out period period, year, seen the same-store sales the sales despite stores we versus high pandemic saw five same than the decline during actually mid- XXXX. actually And Whereas XX% for last than same-store in

portion the as innovative we consolidate Andy Joey from formats, group and just relief, cost the significantly one-time of average. Suzhou business in our we And elaborated Apart three carries Supposedly, past store rebased this have the margins than meanwhile, also KFC years. on. structure higher and Hangzhou cost and

meaningful the would So I general, start -- expansion sales think going expect to in when recover. market, forward recovery expect of margin pretty

I meanwhile, to But top is And for and the market drive this is at balancing company very that line sales. two, that priority noted year good point margins. number also our generally the believes

also for we number very And highlight three, in multiple just a will situation. be now, fluid point scenarios planning we that

all now let's So three these points, my come to question. after highlighting

Sorry a if bit long. it's

is level. second of of that for that very the XXXX, of we okay our XXXX, even bring fair level assume than some momentum actually to I environment but half so that to not same-store fully that to a situation a and or let's restaurant but scenario, macro it under see so first can XXXX to half recovery, that. say So may margin XXXX similar our could is kind that understand okay back higher fluid, be the might of is pretty to largely bit And similar XXXX the that be we

my question. Thank that's you. So

potential. Hi, a the Thank about and also Chen Luo. know also restaurant you and the for question takeaway market summary summary

leverage, overall same-store that generally, expect always on sales, decline, recovery some margins. we too. when is pressure also margins, But when like, said, have optional sales on there's restaurant will As we there put

of obviously, give which quite a then will you we bit operations little encouraged mentioned, environment relaxation certainty, our certainty the bit and Now, New think, COVID little business the are a trading also Year I by about the policy, and period. Chinese as more the us more

are a couple a conditions we The think we the is is I still that we mentioned keep cautiously need market general, really, being of in the to a in So, head. also and optimistic. COVID reason level reality reality terms the

improvement, of them operational of I would think, before, and improvement, if or continue. improvement, mentioned of which margin expect you this then we we them look as labor most some at the portal some

a As over did structure in we have years. the cost we few lot of based mentioned, to work be past our

labor as et I And then so, custom you versus forward. some also, some about where versus expenses, structure, if that, management lease the our think of also if cetera, we restaurant we and you think mentioned, think got carry term, our favorable all rental crew, will about, those

alone, the Now, obviously, fourth right? type million $XX over too, rental and and of the then, situation we in And other total. the about full quarter million couple the received for because COVID of quarter about So this received the in years, relief. year, $XX of past fourth relief we year,

to So away. those are likely go

and have things an impact. normalized, also As if that would you mentioned, become so more

inflation. and looking that we're is The other in labor the prices commodity one

for I also labor lately inflation. have think, in modern condition, sales, overall and our China XXXX. COVID for about inflation cost the the low obviously, single-digits because Cost the economic and that past in price same smaller year, of was been of

Now, example, look -- we since small second have rising for the been at you prices last -- feel prices, year. chicken if half the for

we price first low do in probably XXXX. next least single-digit expect in this year, inflation so at half year, the And

inflation to normal pace. of cost to more expect labor And then we also return

the low high norm. Mid single-digit not to mentioned, is we the single-digit is normal. As

normal of return So, a pace inflationary to there. gradually we pressure expect that more to

And that's the in the margins like of thank we you. how and look at the generally XXXX. So, move cost environment sort we as

and management here. follows. core think me is costs Let color way add these margins The about all that as the some

think of of cost look labor, I your will could cost of it cost of in have manage course, our stable relatively team sales -- cost purpose, if inflation to numbers for expect of to and we we even going forward, sales. modeling XXXX, historically, you because keep We of management we at our sales, can try for If labor.

be But won't low either. too at the same time, it

XX%. about it's XXXX, For

on back all we If about when it's is is you get XXXX, right time Pizza at the delta that Actually, start -- XX%, to the way go Pizza listed, big was now, also cost Hut. enough But Pizza XX.X%. Hut Hut, that proper because means XX%. value -- customers, only Hut very the Pizza At time, good XX%. the and And that when money too was not sales for for low is a of dangerous. that's

is So, keep to relatively our it goal stable.

is the competitive But get keeps of it pay job to is Otherwise, to Cost price a competitive -- good we fact we manage level. staff wages. have our reasonable just our it staff. increasing. a at at And labor, won't

operating et say, would over which years, occupancy amortization, a et and and, have The quite other depreciation, bit, as such I improved area we is cetera, that, expenses A&P the rents cetera.

So, XXXX and XXXX X.X% is is XX.X%, massive a delta. XX.X%

is always on the which reduced also that management Now, would team's right thing believe, I and and from depreciation, rent, consistency like do, focus shows is CapEx. to reducing to the which

way, we brands Hut, true So, and has KFC these our over when for X% and both the improvement by been for -- many But to years. that Pizza focus. both X% that's

that the savings That's always, flow we again, build always, we customer. the to and when However, just I emphasize the to to back margin. We -- don't pass through all one that long-term always money, save on thing this is some we like way again business. would

margin I that management items… various costs So to hope focus about the helps for key think you and

the really cute. launched And the you. toy is way, of I'm Thank helpful. Thank [indiscernible] you. Yes. That's type by By Yes. also, newly very amazed very your [indiscernible] products.

have thought looking on So forward I'm that, yes? to a

close the must You bar.

Yes.

Yes. Okay.

you. Thank

question comes Wei from Your ahead. go Citi. Please Xiaopo from next

Joey, the past Happy had build I long-term opening years, and also have over three identity the [Foreign great morning. the how We question. target. Good Language]. keep journey showing us growth remarks, the Hi, the rundown a of Andy. you in appreciated Joey's your Year, long-term New

So digital your a is stay team which past just you bit ahead and want dynamic. more and will market little the more will question of I delivery. my or competition. get agility protect when in do in three activation, years, because will Joey of whether the aggressive But than be will the your visible, sense reopens, demand very a be China capture is, to that terms always before offensive margin,

stay ahead cost protect reserve share the during reopening? Thank looking your Will You offensive bit gains of time. for competition market to bad in you/ be little China upon margin a you and

Thank you, Xiaopo.

address would whether defensive. past I or the I whether offensive think like that to we narrative in the been have years, three

in three we question. consider I with if think years, we what the offensive have you about just been very talked earlier last the price

We have expanded the footprint years. by as much three as XX% within

think I we the and And we did. crisis is of adversity. view our advantage shall So take

while drive continue from say. priority to product, have campaign, -- forward the approach the disciplined exciting new at time, XXXX we same capture beyond, continue -- delicious and sales, look our think been rather aggressive, focus the our when growth. which we food, But focus value, is would I and on to So focus to pace, we'll I is more

the using the last As years, of biggest on due three the about was have our sales we pandemic. constraint been to actually side disruptions

which we about even to sales, stores driving focus disciplined and accelerating approach, XXXX. X,XXX X,XXX new then includes continue more store So forward, in Andy net growth, going the targeting on will talked

be lot the because a Secondly, still to there's format, optimize store done.

to with the certainly pretty years, brands store But challenging decent their supportive the and their last we the models, not I Pizza job the different are Hut. of more KFC had to for store and test, format, think, a sales, environment try more grow. to three piece a forward -- bit the in system looking to smaller forget, let's done, have actually We time smaller brands

moat And strengthen terms third, to in our invest, of et digital, strategic cetera. supply chain, to

I sense a hope So that gives you focus. about our

Thank Our with will growth you. the on in three have move still anti-fragile improved in resiliency, sales. which on operations, focus continue strong past strategic our years, and is focus

approach network -- all add another very that. when approach, look disciplined very consistent performing economics and we're have since I at think is -- about unit Within mechanism perform me not consistent unit economics store that off, the we been Let well. a so which is very we well, point, the disciplined as spin accelerate when building through our growth, decelerate and is expansion, very when to And right? the

manager As store you be themselves we us, propose themselves before, will when our really saw approved will then and well, think store more the manager and store vice-versa. right more and times we mentioned are format the performing and by if about better model or market

this case a so And example. is

constraint. Pizza If Hut store Hut, economic Pizza was that it store partially at at development limited you you success was unit program. store pandemic, new store unit therefore, at you new net you pretty a time, significant And, And the the the see the with see there. model, Hut. Pizza a rejuvenation And time the economic growth then for see store of acceleration before for look satellite

to disciplined our economics, Thank approach while current which and you, Xiaopo. it's it and accelerate economic conditions also reflects -- performance. will think is and I decelerate so very systematic, and store according the unit And our much unit model our

Thanks. Great.

physically. to forward Thank soon very meeting Looking you both you. of

Absolutely.

Yeah.

Thank you.

question Cheng ahead. from comes go Sachs. Please from next Your Goldman Michelle

my taking for Thanks Andy. Joey, Hi, question.

competition business. the benefit So actually past have is squeezed significantly, been the and few out in promotion and smaller players about the my years, our the question know activities this We landscape.

competitive in think changes? should world, forward, new we reopening landscape the going the about So how

these know days. side, the the has been And challenging on power consumption also, other we pretty

your So activities? what to traffic is strategy back those promotion Thank leveraging you. drive

Sure. Hi, Michelle.

the to hold happy we up all I we in from China, to dropped overall been For business But mean, XXXX, market I quite mid-single-digits. report XXXX Yum the our think ourselves, by competitive have doing has I'm landscape, right. there. that

our has bit. means that So, a increased market share little

So, I have something done think we right.

Going your then view. always the forward, we promotion Well, sales? driving a the product, promotion, and kind and want always we regarding sales in average, look both. of question How momentum, of we of drive focus ticket prioritize operation to sales, all holistic and at traffic

have always the just will fantastic get on series products. promotion amazing to product both? promotion because that have initiatives healthy very strategy. really only sales it's focus and how not -- So, We We a to of without form the

So, product first. comes

the three years, now about with able we traditional XXX can of to new new always our members. We marketing to XXX million we even over still members. every year, market Therefore, products the during have without are the products pandemic, or help because launch

the new mentioned produce really have effective then And Crazy more promotion really with But as to for it four promotions. product, to example, campaign. because -- that's we Crazy in the we campaign, that the over effective well come less And more or -- to amazing. days. years effective have for make first promotion. amazing time part but I Thursday, worked earlier, Thursday promotion now to of call, took And And work becoming

But three the for has selectivity reduced weekend, in last years. our business because quite challenging been

[Foreign like So, Language] for for XXXX, we pushed promotion two for is that value RMBXX. then More for And Buy Hut, Save for the KFC. More Pizza pizza the

for margin protect but drives sales, So, fewer also more effective that that our shareholders. but promotion

about a expand have increase. Now, you plan, is clever is we in the but hidden question probably We you the do here also think -- of it, hopefully, about way. price. range within our It price

will and We please very some product, have who the treat themselves. price to entry customer lower to products point also we high-end want have

interesting burger lovers. a example is for the favorite wagyu traditional which is for Our KFC, beef always idea KFC very

of and our maintain traffic, drive multiple hopefully initiatives, produce also margin the can combination with both the we for shareholders. Thank sales the So, you.

thank pricing. and on Joey you for you the the Thank comment Yes.

Thank you.

ahead. Please, from go comes question Jefferies. next Ling Your from Anne

couple Hi, A of Thank you. Hi, questions Joey. Andy. here.

sales First sorry, KFC expecting? And in both Would like, it New Pizza -- similar same-store how us, Chinese X% for now, less how like, recovery? share exposure, Year. more and or does the pace during terms is with Hut? mid-single-digit it, should you -- the differ same-store sales company's we be that growth regarding What growth of of

also, take like, brands, of And the have delivery look at, versus increase then a business we XXXX. both if we an year

Yes. Thank would we see you. more it when So how Will stabilization this change part? we the have on reopening?

Anne. Hi,

hub New same-store sales, Chinese because well. better, the stores number, than Pizza performed slightly very the Year of better the mid-single-digit KFC For did transportation Hut,

release in mentioned it's earnings government even we morning, the better statistics. As the this than

helps that So lot. a

be regions, quite I lower And And to tier regions across the very at New is difference. all to Chinese early. performed need actually. prudent is, Year the have better, of terms well we this regional mention and year, in because cities to But performed all look number,

So including rather February. number, New look the is the shall Year comparison We and at difficult. Chinese January

more will -- would So picture be that that complete.

And in for XX% terms of XXXX between to to good delivery business, China. the increase XX% is moved XXXX, it Yum from

as where’s business, delivery at -- would mention still this ceiling? at still to However, But is, that, management also outperformed outperformed we to whole, the also off-premise like look because dine-in. business business look the the a I question is compared as

for mean, like the that's worked sales about business. achieve. management the very now incredibly highlight to our two-third, our our right I something has is of off-premise just because in mentioned That important I to earlier. is which And business resiliency analysis, it's about hard would team I the

help think we last breakeven now, also about it. right three than business work we have because with you sales for the of to only in breakeven. when off-premise two-third, the can out how the Think need That's about to same-store achieve is we is as years, -- sales. our that's or why sales protect And as the What's okay done business? It's less the XX% they reason high number, breakeven, breakeven sales the our the business.

off-premise delivery when achieve That transfer and means store even sales to because from significant sales, a shut, breakeven still was during dine-in portion of during pandemic our we lockdown. can the the even that

XX% would XXXX the well. from therefore, you way So And will way that's guys to that that at hope is XXXX -- look the also increase, I at as business this business, incredibly look in and we the important. you

during KFC Hut. than much if I is reason It's four quarter off-premise number point our Pizza XXXX, look If one is more mention did is, Hut. Pizza business. One you KFC's better at than higher

the better. protect much Anne. downside So you, Thank

you. Interesting. Thank

Thank you.

comes Lou Stanley. go Lillian Morgan Please, from ahead. question from next Your

situation. Thank and explanation the you, your for Andy, Joey of

question, pace. Just Pizza versus follow-on Hut that's recovery mentioned, because what just a KFC exactly that Joey very quick

volatile traffic. we situation meanwhile, still current off-premise and this Given are seeing an improvement in

will that Jan sales trend seeing be even for of are delivery of, like, growth? normalized last KFC's like How versus especially, year. down So bit pickup a Pizza fair -- portion for Feb in can same-store momentum And, we our expect and it be and we this does that, how the impact the terms than is Hut? stronger kind forecast may for XXXX,

traffic situation believe obviously will I KFC size and Hut. offset some downward Pizza for ticket pressure on for

we Thank couple these So, XXXX? how also do dynamics in the and of basically, you. picture months next

clear clear Pizza way, a One Hut, in very casual in result. business For are And which portion very, other very one dine-in is right? different and dining, very the they is unique. result, a KFC has big very and

Lillian. to about talked Pizza different. So they already, the Hut response And focus we will so I'm question, a on lot quite be to going your KFC in

Pizza Hut has more sales. will to And can sales drive start the XXXX. profit the remember. Once move get we we under back been, I and focus to presume the then first, it sales profitable, drive traffic the our make turnaround on first control, still you later.

expansion get after resiliency. and store control, then under on the product we But the we work

opened are -- This it. let's a not at year, is lot least That's year Hut forget, Hut. this about Pizza store stores. stores Pizza this XXXX, well, we very year. for for happy record XXX So Over opening the of

are So I too. happy the about it, hope shareholders

Pizza the Pizza scale. And the for on Other Hut. one But our have I the store Anne, very is will going KFC's the How XX% we Hut Pizza last mix topic And is continue XX. operational the I Hut I to and more right than for the portfolio, therefore, store. stores mentioned think, as resiliency. better Pizza right important is earlier, satellite resilience more is satellite store, open all Hut now, this of by the satellite is, focus mean, forward about resiliently? smaller forward about what in going category, slightly other satellite in So increasing fabulous. from resiliency. is better stores store and question stores improvement do The store. satellite than better The XXX store between their now,

So these with but store, key are investment is positivity. the very very for good payback low is satellite the And store. sales

best Pizza takes Well, three this payback. this model business, years for for after payback years. is us XX-some total the new store For store Hut, Pizza of Pizza Hut. Hut Two-year

of So you open can open the business going these. as satellite delivery imagine imagine, you will of the a When well. store, can also we also store, we're smaller more benefit more to

do speed it But the Thank at time. certain is are we'll I hope that think a can you we pace. I very run some because business speed, know It's like we doing, we in own hope the certain for our running clear. we marathon. can. what takes a At see I are you. once So it beginning, – at it We our focus and

Joey. you, Thank

you. Thank

Sijie Your next Lin Please go ahead. from question comes CICC. from

Thank another Andy, you, Joey and resilient congrats quarter. for and

whole So I more have picture. about one question, which the is

even, So restaurant the Chinese Chongqing, but we it's situation Chengdu, sure I'm some is not shopping in recovery recovery find and of if good regarding cities, the Year, consumption, that, the of really New the maybe like nationwide. Chinese common traffic Changsha, recent after more sales

most tiers and Thank there will for among wonder in have regions city and we remain extensive layout since is you. regions in most different the So city I future? opinion? tiers, our what recovery

you. thank Sijie,

particular, momentum Changzhou, in X like good New mentioned And The And Jinhua Year city or I the earlier, we for in also a across destination or recovery As recovery domestic good. Chinese Pizza Hut Tier the is tourist saw is region. encouraging. because traveling. Jinan is some

So to been benefit from city people the not also lower-tier our for they CNY. benefit because then And have three home years. go able

So for see value happening, the the we happy are happening. this But quarter is money, to spending post-Chinese also on Year are all cautious also that because we're our happy that. caution trading is while New improvements

a coming the customers to get to back, we door. see traffic lot focus promotion value while happy therefore, are on we the our So, through still

everywhere. situation, are customer Going they the particularly New post-state might forward, cautious. in all right I our trading, economy be Year years that natural spent think at XX countries I is consumer concerned And because when that's focus look only macro behavior holiday to across just now It's the behavior. human consistent spending Chinese. is UK, specific post-Chinese or and and about not

January. just period that itself and as have Sijie. Thank the towards trading holistic trading you, we preparation February therefore, optimistic So, January cautious

want Yeah, Joey's to a And comments. Sijie. bit add little just I to

and then period. trading I think we new in Year by encouraged, also are the obviously, the general, Chinese very New coffee cold

are year. so optimistic And we for the

say looking I think But that do sales what trying I we granted. take is for to we're not grow brighter. things are think or

We uncertainty and work we're that growth our like and be sales store about going to ahead, hard to and change believe expansion. there's steel, that drive be disciplined going to then

best the thing so prepare worst. as And say, the and the we plan for whole for would

that. we'll And in years the strategy, continue last of and couple so let's have been

So different scenario. quite for Thank you, Sijie.

and you, Thank Joey Andy.

you. Thank

CLSA. Your ahead. from next question go comes Please from Ethan Wang

Thank ignored our very chain, important morning on and COVID market largely time. but supply is post-COVID, both Joey and by is business, Andy. to during Good which some question you. My

that to inventory have noticed we we that apply our on chain made well. to So due supply a may footprint strong very as Scope carbon X

and business in how So just that's some may partners affect to changes supply mean make we to our investment our Thank chain choice, forward? we going substantial regard make that does our or to wondering, goal, our you. achieve some going to

you Ethan, for Hi, questions. your thank

to In be important it's terms for of long-term supply advantage And sustainable very continues very a chain, obviously, I important growth. our us. to think, it

of our reduce of -- Obviously, we as step terms -- store will Investor we'll chain next our we also and in carbon automation, and the mentioned the other we'll up continue our previous couple chain, Day, but as in footprint, footprint investments centers will you also years, supply for we in supply mentioned. then in investment be including so infrastructure. And expanding our supply for to chain

it's for you us partner will supplier our with recall. supplier our base, very Now, supplier obviously, work our important to to base, what

you look climate it's new. if relatively still change I think the initiative, at

running We it. are

for it, plan. for and the plan submitted have -- our targeting initiative day have We we

to emission zero by net We XXXX. are achieving committed

improve investment not that a and so closely but commitment make with require work very only And to operations, internally our supplier. our also that's us

consumer, with require to environment sustainable a our future, then make to we too, very And also involvement. in the will everyone's work closely

together that well. as goal work So the will with to supplier we that us toward also all and it's not but work necessarily change, would encourage our base we and study

so about we ESG initiative supply our change. initiatives, chain the And think climate generally especially that's versus how

is means that investments. It future, the add investment, sustainable have now must additional impact, because justify to is. means to we that, when means in the points responding well. to be It the it desired just two as we that mean supply ESG, that I oh, that have chain that margin China's emphasize that the in One to to in investment has naturally do. not philosophy, Last payback. do investment Yum additional some people to think right talk thing does the has right the be it's a thing to for about business

in little three to two store well, little direction. invest our that energy. So example years, -- in have we the very the equipment think about cute store payback you is expensive. justify It Well, economics, measurement the the original to we meters one measure towards usage years, of because overall, does not is our if

the suppliers do? the and our with what So get whistles. worked of that We little of rid bells cute did teams equipment,

affordable. install stores. investment. them And enough is our saving in So And very the to we the justify it's

the So is protected. still payback

help supplier that's discipline. we our And So to we with one share whatever learn also them.

point that's So one.

very is very, And share it, really can passionate two team the because very excited too, this supply fun last about there exciting I'm some Point area, chain. is and one I my few with in are about here. years personally and happening innovations you.

we centers supply Well, Shanghai have we During warehouse. chicken different the the to the logistic province. Shanghai during lockdown, one lockdown, have to XX

completely to for right? serious was wrapping the paper? warehouse open the our the And in cetera, How Shanghai our that business, bulk, stores can keep Shanghai. the was warehouse, without package, We et is bags, lockdown. have But we packaging supply stores. paper one what And that the the paper, happened,

start to team, sea is a a solution. which most and when the That's start came logistics in material we packaging such we team, our build within when brilliant week, freight. with to faced even challenges, ship more through with up we this site brilliant nearby Well, port are we a

from The part Well, of to the can the the of of down the northern it went Guangzhou, north, then to everywhere part One middle happened Tianjin, to southern China. stop to of Tianjin and there? cover what lockdown. distribute the One entire railway direction problem railway. China. part went Well, to without China covers the

part So the of these okay. train went And packaging and and on materials get are some Chengdu we Wuhan, everywhere. to

a everything. in sea can now now logistics the at center, at rail look imagine, look you it. when So past, we we I trucks, we trucks, the love the the the opened and freight,

forward. and we past the few in that It's the I think Thank that's going do fun. shall you. our business years way

Great. Very useful.

you. Thank

Please, Your [ph] from next go CMBI. Red question Sue comes ahead. from

me? hear Hi. you Can Hello.

Yes.

details year. Hi. sharing Andy. at Thank and resiliency you the Hello, so much Joey for and last

more I too your target. just new like is ask because, a And your conservative, target to think So than bit done COVID, And think you last I'm have X,XXX be a do with the numbers guys on well the stores more is question bit COVID. would you year opening really wondering, store could this new about if you obviously, higher guys last year without year?

And CapEx is much it's than than then your much previous lower also since lower the also, level still of perhaps lower year now. expectations, And And spend per CapEx, and is the last rent the you your store Taco and pre-COVID take level. store the also, should like well. And the Bell that? you. mind down Lavazza number smaller Yes. openings of advantage more of brands breaking for Thank do as we why

target. about our store for you Thank Rob. questions your new Hi, opening

was opened year, comments, more just want than store bit X,XXX The little increased. previous which about store the that net for we a than echo to new So stores. our is more last is, X,XXX I

very good. mentioned, are and Joey our we're obviously, new store very As performance disciplined,

opening quite So aggressively, been stores during period. pandemic even the we have new

and improve network. optimize aggressively portfolio also We and store our also our brand of

year. that's plus so, you the last see X,XXX why And for number is net

growth target -- it That's Now the conditions, very this store. company, stores obviously, set it. our would that we disciplined have out in this reasonable that economics. range year. to way, of to and do big we like year a open for many year, stores. the staff right, then so to is not emphasize X,XXX when But important a like, not more we x the you're right? before, of way this -- do We I X,XXX quantity stores look of sort ultimately, do new really the of the a is than mentioned what's and And be we quality pay quantitative, we will What market going -- new generally as thousands our at is the open growth. give how number say, And on unit like hey, of but is depend or

is opening. is good, As sure opening the the I they market our market when mentioned, propose perform they be well, will And store unit the approved. promoting store be really booming, more economic economics, will and stores more manager, be store for

so both build But approach business acceleration based economics. point our is or that a our person's conditions And matter a be based the the consistent, will really on particular view, it process reflects of on process. not of a disciplined also there that market and is

make will a and well, right doing they our we are see feel confident strong we So, network our like decision really, things very confident if sure we'll store that healthy, really and are manager I'm that very expansion.

in this really is driving we biggest As This not also in important the only before, driver mentioned is but our focus because for growth. kind year, really sales, on sales and topline, is The margin margin. sales. of the

factors. about then And when we talk cost other

few it the have and years, industry, to able we confident we're the So, be in reason long look the that we think be the terms focus, confident will we restaurant the in will good market have last outperform -- if I the overall number you to at for our of that I'm do and haul.

add. operationally, Analytically the rent, do stores. to sales, mentioned not CapEx, how point the good most analyst point the enough, store factors all have. are actually important the is But Red one these we [ph], open many factor I from to managers important or what have of is view,

apologize three And good two our focus to time our we store managers their we on one. for us, because even number take in GM for culture, to some years. don't train, emphasize And

most are in people organization. our Our important the store managers

all have Thank to rent, these and make to sales. order the the in good operation, control, job is run we ensure me of But CapEx, mentioned, the most the as we to management sure important the put things growth, store for under store. team we the my need managers you. quality Andy So,

Joey number pandemic. with opening, of mentioned, KFC record Pizza terms opening brand in like, remain years, seen the brand, even think before obviously, of Hut by small largest and for years a probably a as recent have to In I you've number accelerated

then And And last after XX now year also then very for see growing Taco already you rapidly. it increase multiple -- happen think increase. very expansion we Lavazza, than robust more the as you are continuing -- expression. compared to And to XX, to Bell store about store right is

In terms new we'll with Chinese business, of work franchisees. our the right closely

increase We network include will module. see the by Thank and you. both like business, XXXX for to our which Chinese the ship

you. Thank

Thank you.

Thank you. Michelle remarks. time. There for are I'll no this now closing questions back hand at further to

joining speaking next the Thanks, today. you earnings Sari. Thank call to We you forward all call. on for with the look

Thank our information you the through contact release, day. have please reach further you. If earnings great a out all questions, in have and

Thank you, everyone.

Thank you.

for Thank for conclude Thank participating. today. you. you our does That conference

disconnect. may You now