Yum China (YUMC) 7 Feb 242023 Q4 Earnings call transcript

Thank you for standing by, and welcome to the Yum China Fourth Quarter and Fiscal Year 2023 Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to Ms. Michelle Shen, IR Director. Please go ahead.

Thank you, operator. everyone. Hello, joining Quarter for Call. Earnings China's Yum you XXXX Fourth Conference Thank today's Ms. CEO, are On our call Joey our Wat; and CFO, Mr. are contain Andy everyone Yeung. I statements, materials that remind future which forward-looking our earnings and would call and like uncertainties. subject to to events investor may these forward-looking differ statements. from materially results Actual All should our in filings in the SEC. be conjunction statements the cautionary included forward-looking our risk earnings factors statements in release considered with and the with consider includes also measures non-GAAP the comparable certain measures. carefully call This and GAAP financial should GAAP is included the earnings and our non-GAAP release. of Reconciliation measures in

can the PowerPoint unless currency call, the website. that You find call exclude webcast and foreign today's presentation Please otherwise of the noted. during all this results of IR year-over-year growth on our impact note

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

joining net industry. operating the capture everyone, It's of today's kick stores. to conditions. would want new and today's our Pizza to off in Hello, and today. appreciation X,XXX profit stores. to Year the through coming XXXX beyond. and for happy we XX,XXX hit dragon. soared tremendous walk expressing Hut growth and and call of a strategies all by profit you thank healthy We billion call, $XX count and Saturday. us this opened you. I year revenue I special system wish I $X.X XXXX, my items. stores, New sincere Chinese to reached expanding Thank like grew total everyone Their our past enabled China to store our like high, growth to evolving The KFC our a reached XX% discuss billion, quarter seize of our emerging breaking XX,XXX see the opportunities fourth reopening them grew excluding time in fundamentals the you full would deliver stores, for On have a X,XXX business. Core efforts Yum to the employees. In outperforming Operating market record in an to and sales for year. XXXX China's from transformation exceptional few was helped years year-over-year, we the business incredible pivotal opportunities record XX%. all-time us

the XX China. have in market been the For leader past we years,

restaurant and [ During growing brand. KFC Instead the passed flavor hundreds the flavor out decade being X/X several during next have the want still [indiscernible] or operators of [indiscernible], long in of this developing where flavor to or of of this industry of serves ]. even XXXX, month, see the market, we of runway In time, be still China double only the the population. even our for decades. growth restaurant we a digits is of or

in target X/X by is X/X expand and KFC cities density new of This being additional our cities. population means by existing customers. adding next to Our is store closer X,XXX entering tracking the and XXXX, operates currently reach China across our in X,XXX to cities. ambitious to cities an

are upgrades costs, space for differences. consumption significant For and attractive these China cities, the city With Pizza tier brands, with cities for our consumers larger. our products. lower packed power is opportunities purchasing us. lower-tier and presenting urbanization white is regional in have living In Hut even significant emerging and long-term

cities. from These high-tier stores years are premium benefiting in cities, recent and lower-tier in sell in performed costs beef our have example, lower-tier just X/X ticket the is lower as well, in an as good burgers higher-tier of rent. So stores And labor well as Over as new in average cities. cities.

serving mainly we these consumers now, in For are middle-class markets.

we our expand, we base. see further in broaden widening opportunity customer addressable price As points to

stores XXXX. by XX,XXX Our mission is to reach

years new X Hut. payback at our We for will and X continue Pizza KFC years store protect to for

expand This speed. at is been years, target. we can to reach have past key this an improving fundamental we accelerated capabilities the our reason Over the

are empower our on Some in the as of improvements without enough capabilities. second, lowest cost also first, in expand to operating potential compromising site rebasing leases format third, variable XX RGMs of years, restaurant upfront bottleneck open risk; stores our capable across to lowered digital AI-enabled more our with the lower ratio quality. past multiple the of structure the improved city solves of based up majority tiers; level sales, flexible these good oversee we This managers tools rapidly. having rent include: store investment XXXX X.X%

Finally, reach gain such strategic that to locations access franchise us as before, were beyond service to partnerships our highway allow centers.

was sales healthy It fueled In same-store grew by X% new increase addition in our transactions, XX% store a XXXX. in indicating to growth, growth.

for Our innovative last captured effective year. channels X.X and menus, transactions money online value over excellent billion

In we XXXX, or offer let's XXX innovation. products. we That out every about week. food new upgraded more new something than rolled Now talk means

assure China. Some in examples Beef Hut's but spicy Pizza you a very are sauce and This duck [indiscernible] sound blood with KFC's bull Chicken can include bit exotic, Wrap popular with they and Taco may I pizza.

many have dollar Over most popular entered no U.S. and was million in $XXX the club years, our exception. products of XXXX our sales,

burger, million with quarter spend cost little on customers. very meat. the Golden meat than in joined protein, cheaper X much using high-quality Chicken breast marketing. It breast meat club is [Foreign Language] for but XXXX launched dark amazing XXXX is SPA in chicken money offers of popular chicken is and Our our breast very of value meat China younger in with very $XXX

X% million by We recipe juicy Our we more XXXX, chicken success sales, in last story. now over improving chicken cups chicken And sold in product by than combined accessibility. XXX it million last remarkable XX XX% our [Foreign rapidly a and XXXX, sold close year-over-year. original beef were driven grew the XXXX. burger chicken. increase whole also Whole innovation launched that XX another whole in years. KCOFFEE and selling Language] to of year, been we have the contribute

just to great cup. addition drive money factor I great money for key Our mentioned. to for value in offers traffic X.X a below per the at value coffee RMB food that Great remains

menus entry to strategically point with customers. price attract our products We enriched have incremental

our Our recent super value huge been long-lasting KFC and year, supply Last market empowers offer [Foreign to received choices Crazy we [ burgers apart underserved as segment. in-house Thursday, expanded XX while RMB entry combo, including KFC, platform, customers. of ], innovate combos our chain has value identified the from protecting fantastic price us Chinese well its Language], margins. At which Yinhambaa by

year, XX at pizza, X pizza, under segment underserved barbeque a the including launched November of entry-priced market the we is chicken delicious RMB For Hut. the significant portion represents Pizza last In Texas but pizza.

menu choices will We more our to this sales. capture to to continue cautious incremental cost year add

grow further We also see amazing sales. potential to delivery

structure be more with incremental capture ticket and market pricing especially smaller delivery customers. our will help norms. aligned segment traffic, This more adjusting to are price-sensitive We the us in from

expected super mini the own In our X/X our aggregators. app, online Our digital use from third came of from XXXX, and from sales surpassed X/X $X.X our traffic X/X channels. about is third-party programs that, own billion. driver Of and

Our grew own rapidly XX%. Super APP sales up last year,

and We continue to engage recruit members. actively

a exceeds members, sales. purchase XX% times customers a Friends, Our of XXX frequency loyal more record loyalty program of contributed The our who was than million XXX K year. our our most

manner. platforms. consistently customers major stores. This and platforms e-commerce Our physical cost-effective We of the expand us new sales reach led in in beyond a collaborations attract industry allows promote to media on and new these terms orders our social with generated

in deeply are well-loved ingrained consumers. trusted and by brands China, Our

achieved just striving remains record in stores operating track in key right with engine in Pizza. Yes, Pizza more profit XX despite growth Little a localization operating and improvement Its making challenging Hut store party amazing XXXX. sales store to KFC in billion deliver Sheep the environment. on success. initial to with our sizes economics. Taco continued adding in refinement alone and model of in which and year-over-year. notable Bell compared returned there's to core to growth is in smaller to operating model, innovative XXXX store picking stores is tripled Lavazza We Their $X.X caters XXXX notable doubled is up, is XXXX. profit XXXX. menu progress. a XXX profitability work has

in since expect it be Huang In net we both opening profitability tripled momentum stores, XXXX. acquired Ji maintaining to in and Huang Ji every in XX We opened and China resilient, new year Huang continues profits good Huang overseas. XXXX, stores.

expanding footprint comfort items, Chinese spicy up New choice fried soul. Language] a and egg menu Year. of awesome for burger, into continue the KFC's your newest we in year. Over our sauce exciting in are China combination [Foreign store gains serving will and It's XXXX, [indiscernible] delicious. this overseas chicken absolutely food We innovation, is for

very earth a the offering popular year. has We Language], to name, get also which down Bucket soon. And our means lucky It are KFC. also for stand first and again Golden letters rich this widely [Foreign

RMB is KFC XX. launching around, are right more getting So amazing. each China. Pizza Language] at abundant [Foreign it's just products, popular and getting in choices new including XX Hut value other to The now, reach

the desire more a current holidays. in there economy, to rational Although consumers are and is during indulge, price-sensitive especially strong

to designed attract are trading and offers enticing vibrant generate over anticipate Andy? eagerly I to call turn period. With will Our Andy. the that, this traffic. excitement I

our quarter the Thank our results well allocation in We you, full year. the full These environment, fourth quarter the sales year as incremental by year. In will capital fourth and we a maintained delivered outlook same Core quarter for operating basis. profit on the operating We Chinese significant Year, comparable strategy. discuss results to Today, XXXX quadrupled milestone current fourth Joey, everyone. campaigns. financial the sales. I us full launched attractive and happy our robust followed in system allow and and improved strategy drive reached to margin growth and as and XXXX response New for as adopted quarter, traffic restaurant our XX% year-over-year in

operations. introduced results how additional have As This performance core noted, of may and you other affecting items our transparency comparability to of our the metric impact, operating comparability. items special evaluate core we excludes provide on enhance we profit exchange and foreign have

release For further table refer and reconciliation details, the earning presentation. our please in to

came quarter X%, XX% To same-store contribution, XX% of at the as look XX% now in quarter prior detail. put it performance traffic year-over-year, ticket X% fourth ticket our into XXXX. a KFC of stable X% sales especially and in and system lapping our RMB ticket temporary successful years, grow and sales past last XX, the lower lower average. our for strong and led average X%, rebound focus Overall average entry increased of Let's average. increased average from decrease design net System growth strategy X year-over-year. dine-in sales ticket in XX% driven By remained of strong breakfast was XXXX. with and growth brand, and by since contributed mainly more traffic. sales perspective, than our to XX% Same-store Same-store A unit in by the XX% year-over-year. of sales expansion revitalization increased year. has offering the by pandemic Pizza closure of ticket growth sales and quarter XX% Hut is higher been new growth from daypart same our price traffic system growth same-store the sales, fourth was consistent

to expand has recent incremental has market party-size traffic. pizza Our offering and proven our XX focus below strategy been expanding effective capturing in The and options. addressable RMB smaller

margin points more was mainly XX.X%, On from offset expenses. restaurant advertising inflation. last comparable campaigns XXX was margin Improvement a and This increased more restaurant rider basis costs, grew prices points. marketing Our wage sales than XX and our basis, than favorable higher commodity basis lower year. by lower leveraging,

higher items. Cost of go XX XX.X%, sales basis Now key points the let's was through year-over-year.

XX XX.X%, prices flattish the was Sales cost offset and for gains This low tightly We favorable. and by commodity management value points costs expenses operating as XXX passed on rider basis. or below year-over-year. frontline comparable year-over-year offering revenue depreciation improved rate G&A that growth. Operating headcount money. profit keep million. more We $XXX was points quadrupled. for other XX.X%, X% and staff. Occupancy of expenses comparable basis improved marketing better During advertising and basis as increased to consumer of Cost expenses. lower increases was on to efficiency growth year-over-year efficient a than came or and XXX a more basis. leveraging, quarter, profit labor rent points from well Core G&A basis were managed

EPS XX.X% was year-over-year was a rate rate year. was preferential for tax benefits $X.XX. QX tax XX.X% higher pretax effective on effective Lower and tax in due to Our the Diluted and full income. more mainly basis

foreign items, Meituan and the increase special XXX%. investments, Excluding exchange was

amazing to Now China. that X,XXX new opportunities excited growing digits. years in turn remain XXXX, still it's vast anticipated our XX In outlook. growth opening the stores. let's We about at we store net After are in double our X,XXX to we China,

heavy Our XXXX. continue payback store us XX,XXX to new reach expansion give stores confidence and by

high XXXX. single-digit EPS compound grow to Investor and to by growth we from profits XXXX operating aim rate As compound double-digit and we Day growth to shared last at rate system year, annual our double-digit by sales annual

We will us new widening campaigns customer drive products, base addressable by price This innovating expand sales. to engaging and new opportunities launching capture our continue help and to our points. incremental

We X-year rebasing structure to are confident executing key our Cost focus. continues plan. be in a

to Our margin. management savings will back us drive customers efficient cost protecting pass and the traffic enable while to

I quarter demand record-setting a I that phenomenal Before we to outlook, reopening, profits. into dive We the from XXXX the everyone captured which first was solid sales. quarter achieved like would first robust quarter during delivering remind

not On substantial year. side, to the from recur temporary VAT which cost reduction this expected we is benefited and relief benefit,

We last from year. quarter gains the from also first benefited labor productivity labor in shortage

yet and now and operating we have have a new of new offer for response, year, the very under to Consumers a exciting can that attractive for more spending, first expectation products, great statistically great value rational are promotion. number intensive planned ahead Looking quarter this money. product in Joey normal. we new launches and appetite mentioned, as and In are

on dedicated improvement also In including expenses. capture these work we light have resources of Year hard and will productivity changes, to We control, New drive cost peak more traffic. Chinese G&A sales the and

basis core Our profit [ and year-over-year ] relief, operating in quarter. to in maintain on will changes a aim benefits rates. stable temporary relatively deduction VAT our the This is exchange foreign exclude first comparable

XXXX, focus in investment returns million turn while return shareholders and $X CapEx capital That a share returns, further return let's around $XXX from Now growth There's to own on years. than in another $XXX XXXX, we $X.XX and excellent the efficient dividends roughly XX% X in our full no XXXX organic shareholders. allocation. we With better capital to million for investing end strong repurchases. original billion. to target. to shareholders be expected in would $XXX a our to of million to record delivering low the to return accelerate plan returning and XXXX, We in the cash the returned of to the Since In We $X billion $XXX raised shareholders, In at range billion million million. plan is to next $X.XX. to have by $XXX CapEx dividend totaled $X.X we our accelerated year. in our spin-off, be

repurchases As in by already for a program $XXX and have million. $XXX further share around repurchases, we place million to plan increase

market our to commitment the This stepping of X% return with The $X.XX current cash of around demonstrate repurchase share total cash-generating So in in share a our billion returns to up price. XXXX. is equivalent to our our of shareholders. cap confidence and capability excessive

to me Let it closing for pass remarks. Joey? back Joey

Thank you, Andy.

AI and were and application. fundamental chain made through superb transformation dividends net to like store format achievements returned we line reached These in cash and XXXX, possible our just turn store buybacks. well top implemented record industry-leading as supply to at shareholders we flexible to management the to our Before and we summarize bottom level in Q&A, I new and record as line scale ranging food by we from innovation of capabilities, openings, would

our to conditions. for in the navigate us, high market agility Acknowledging expertise standards we, our and for expectations high shareholders We have ourselves. hold set turn, diverse showcased equally

are generating it fully committed Michelle. for X-year sustainable and continued target pass We your our shareholders will long-term I I our for our would back support. With growth like to that, to shareholders. to thank value

Joey. you, Thank

your to order give more please for a chance Now please In we to to Q&A. Operator, questions. at the start open time. questions call the the ask questions, will limit one people

Your comes Cheng from Goldman Instructions] [Operator Michelle with question first Sachs.

also the resilient very for congrats shareholder still returns. result impressive Andy, Joey, and

company's the still the short term. bit long-term a to question strong position, understand we want While on my but focus

and more we us mentioned first trend? I core same-store also, give sales some profit. pre-Chinese New in for you about regarding looking the Year Andy quarter, And are think can traffic colors So operating steady

margin? can you So refer question. he like my clarify does to or So level that's profit

Thank Michelle. you,

So clarification statement let core our me your quarter. the question in on about first address profit on operating

not level, margin at the We overall the are side. looking

reopening surge mind year leverage also from in keep to labor that profit, phenomenal exceptional, quarter in quarter relief, was shortage. record by then reduction want first which the both and labor sales we gains achieved obviously initial and VAT significant temporary the think demand some I from we was the that last

them So year. to this repeat those factors, we don't again expect

And that I on I so hope answered clarification. Joey? question

Chinese Year? the New For

Yes.

Andy because New because excitement in not calendar X new going very, solid. there. The Chinese Year, New of has before the the has solid marketing during time [indiscernible] had we we Chinese -- For first for Year. tough been -- weather have Year. very burgers, the exciting trading New we full far really And by Year very then the Chinese -- now, the is only presentation Chinese the bit his last earlier, wildcard. campaign day trading, a the a still so to the this extreme earlier New need product. been has excitement X New a the is a Year. mentioned trading of certain a right a to it's the prepared extent, Year, we far to launched anticipate and But has weather is phenomenal it's until And bit of trading first the Chinese Chinese weeks XXXX the The But a been New so

where our first a New it's team. Chinese of Chinese going total Year the all golden into quarter. was the that's our is the day we But very are. operations after So about focus bucket. New very, of our focus And That tough Year

happy same-store are if with sales. That's can we right be the where actually we'll we flat So stay now.

Oppenheimer. Bittner comes from with next question Your Brian

profits flat first -- keep As very last as the is your but versus I comparison quarter operating understand year, is relates it. a heard difficult I the it to goal

of we sales there the will comparison, difficult challenging say, to how half keep year build? those profits year, sales seems second operating quarter do same-store maybe past this of year need the And first setup? the you do once How versus, to which the about first think the do think or order way type you sales opportunity you the then, flat? about the half Andy, be grow what get trends So more a to and of in

Thank you, Brian. Yes.

into we question outlook, just rightly on there's like first of again, margins a couple quarter Overall, me before, confident maintain the long guess operating out our a will that outlook, X-year lot with I detail plan, stable But dive the the point quarter in run. first let So consistent so. are of about right. things, more we

mentioned, have is because certain restructure factors base, effective would occupancy looking going long here we're other better over And been so emphasis affect near and we I capability cost manage as and advertising also doing term, run we leverage As digital near-term the our to the improve to opportunity into look the have to also costs situation. expenses. in the term, then -- that potential long then our to better G&A more and also our

driven -- cost Now margins when restructuring. well sales in improved as as restaurant and growth, same-store look quite XXXX, right, at we OPE by and meaningfully. That's

very level margins. KFC, then a Pizza little bit in Hut more And it's in long a So offering of the has terms already for high room term. improvement

And factors as with We us. And trends quarter will and in a normalizing and quarter be Now every again, mentioned that's other to fluctuations, phenomenal important always quality the seasonality very first driven profit. you it at is if the for mentioned was will and year, is first because last operating reopening. some the then days. so then a it and year, high as determining record-setting margin sales achieved, This expected, obviously sales we by by look factor operation mentioned. also the driven quarter the be post we be

some million can table and one-off, received so at we reconciled year. there onetime as the And last then you look $XX of mentioned, we roughly also that -- was

new are hard we the mentioned eager consumers high working work for So and And that in us are a their terms have for up we good right? as prepared has remarks, products. our more in base new this normal, under to our and quarter, value set manage for costs of rational year. Obviously, sales. we'll money spending a and in And drive first

we a Joey as promotions. of mentioned, campaigns And sales So, compared sure launches significant have and now, make set up again, to is a resources have because drive a it's of Chinese number very we traffic, New to year number okay? and so And also very intensive that New outlook just right Year Chinese solid like too later especially and bit attractive product then this Chinese Year that around Year, -- New last to early year. we give

is So right as we under the normal at plan our track. now, on new look

Joey of very a with hundreds of traveling New mentioned, because millions quite time. short there's Chinese uncertainties a Year as people few millions are period -- However, in of

observed And an so impact we weather conditions not or as have the reasonably may may there. have

monitor and the situation our if we always So any we changes quickly will to been respond have adjust plan continue necessary. to to as

we'll operating productivity the exchanges. cost improvement, and on core the foreign maintain on so I items for focus to as cost goal And a obviously, stable the side, mentioned, And really profit is after nonrecurring then adjusting control.

Your with next comes Xiaopo Citi. question from Wei

and I'd just And if a terms of which look like look the the in short to XXXX, 'XX term Andy as at good bit down. longer we control mentioned, sales like look first G&A business. some at very actually term, is factors the Joey you are at If going G&A. the macro. financials, a control in actually, you there If thing in little ratio, we weather, cannot look

to go at of down in more first question. on 'XX So to level? shall G&A That we management the that our ratio cost we be sales core continue will because that is have certain the control admin

the Andy, is, year. Joey and mentioned question this second are that consumers more rational The

well as consumers? more Will comment So be competitor on rational will rational competitors? could you with your -- more

G&A. handle handle the other one. the I'll You

just Okay. cost bit efforts G&A. about in a with the our quickly talk little will I conjunction

to that past last put over have and efforts year, restructure the few you lot we of cost our So a years see can base.

the still years. of to around trying we somewhat. few we cap has And the reductions stable the Our stable, significant we're shift plus, like, Labor generally the is costs, have some for we overall labor few labor minus occupancy and X% cost. over delivery in other over COS also it cost, drive XX% Obviously, moved like did improvement a then compared CapEx and than for past by around been full points. offset on the XX% to pandemic, target cost other year. And the one seasonally have that XXX the more to years because see that cost. and impact inflation But basis past mix through level almost [indiscernible] up able obviously,

Our rent is at a record low of right now sales. as a percentage

trend. also also And the down portfolio. so that's improved have longer-term and And come our efficiencies we depreciation because our costs CapEx optimized then

the are those So longer-term trends.

In the sales And advertising digital. -- we lot already. other member member right XX% cover our terms invested because our marketing have lever of million XXX margin in is in a us large, now it's almost base very for we of and

So be to that on work we think we'll able in the future.

G&A, of has right, improved to year, terms this of X.X%. G&A sales percentage In expense a as

sales. do that continue new automate to ensuring sustain trend would of obviously, automation those G&A like remain other to in-house, labor we'll To lower aim technologies improve and to than administrative our cost. cost, some efficiencies in that growth continue that, We significantly by to to help continue

sense our taking trend the the long-term of view. the that Xiaopo, and our your industry address a our trends, to question consumer holistic trading observation back competitor then a and going looking at step of hopefully trend, by trend, will give I I'm by the own you think trend,

growing double China but reported -- actually is mid-single It's our everywhere reported actually digits, it's really XXXX, XX%. grew economy while digits, industry. First, at we at industry the

and average. the So doing recovery industry we better restaurant was the very vibrant are the for slightly of industry XXXX, than

is easy or XXXX, many not headlines be to example. was give the the an recovery. growth the misunderstood. One including reason factors, could However, disaggregate I'll you for it sometimes

performance, reporting grew X, the by the revenue In is our sales our XX%. difference. was dollars, to by quarter growth China But X.X%. report sales so in that X%. the China, a the Yum that currency X%, For the In due is was reported exchange foreign currency, missed headline is in which renminbi reality, U.S. at operating it's expectation we

nicely. quarter from disaggregate is But operating of course, sales recovery X, very see actually was the the we growing terms of XX%. the much difference. fundamentally, we So if the exchange foreign as our then, industry currency, system as And in

competitive for aggressive recovered net-net, are XX% absolutely. going in and So forget, the many competitors it trend. has been so competitive? as What to always share not XXXX. And Yes, to Is able industry last Yum not explains XX a consumption the point opportunities because But so we years it mainstream the well, as years stay well. China in open fortunately, X, there. other X. Point XX-some that new as have leader by That's why let's been market to than last is always have been stores the thinking. I'm

to a extent, just challenges. can extent, certain it's going but we thinking certain disagree. to So To agree customers are rational. mainstream The is grade with many true, getting China is through more consumption a on

we mentioned is even GDP not upgrade China growth Urbanization in is growth, and However, consumption still still is been GDP happening. with also what those X,XXX all mid-single-digit X% we track restaurant a has don't stores because malls, at We opened or which even need look China's malls. to at in of look we can lot shopping top industry. shopping at happening the

the Within the were of X,XXX top quarter X/X segment year, new there alone, of malls, malls tourist rest, shareholders transportation to X. and location. the the than trading from And apart quarter small -- and of and half our second that during better are we a X location report shopping them number, to opened mall better shopping XXXX are stores are XXX the opened, shopping well, these not happy

consumption and street high street, mall you close when to shopping can or that the near a to traffic will opens imagine moves So upgrade. high shopping itself the is

years the XX-some it? So -- do to a come We of respond our brand price opening products back up customer, last build our in is market how focus the of how the are the with the and to focus leader. We amazing a ongoing we rationalization to point. and value, combination good

the to the continue price #X, reason all out years, food think [ very launched That's good price combination food. of X even ] happier. the at is of China is original ticks roll can But many these, then you chicken, ago. I about are the same the of original we recipe ratio Only always XX increased a price we time, the less after housing by we point. why cautious and the price Chinese same people of recipe, are As than so if XX many the see years why

price right. we're product entry the but value We also do And So was time, to RMB as to year. combo that This it's range will during come again. with of softness. trading we some and We the X, KFC us introduced very of trading all same launch. and reiterate celebrated the as December. XX, the [indiscernible] confidence growth. burger Western bit pattern, launched at we XXXX XX and for forward. this price quarter seen we of stores have X a bit that December dine-in a also, We the range November working. Point our is have is in what going gives at about the Quarter much don't idea a investor XX. then hope, for the of nice improved then X, RMB XX,XXX the know going give during But to to meaningful has in trends started rebound Good very and improved And us. some It I more it is deck. strong. solid QSR

the XX% all By popular. zone delivery However, business. like improved. remains trade convenience. our Customers of It's still

-- very the best resilient Northern the Changsha. rent amazing By well. year. of X XX% do and location are that, concept the recovery different earlier, most doing the focus but you business and and was yet the are our very traffic the of across go the model if right year, part very it and whole best Customers different. expenses last I and food city are the regional more and eastern dropped. part earnings table, food lapping that vital are examples people China, is doing hubs clear a the our there. most delivery the full changed. on doing than People's in XX% very traffic the that weekend is the that is the least, destination weekend -- year. little this because region, One our We As worked. during quarter China ticket pandemic. some happened for the best put product inland, the to is a veg food cities -- buy difficult to going year And we part proves shopping best not COVID are all for in whole economy, chicken transportation In weekend. forward. And still People others. in only are the the behavior recovered can than they trading these and lower-tier because our of it the regions the important for central that Hut -- the last Huts day. Other is chicken, just a phenomenal better malls Pizza meal the well business, during for very very, were And cities, weekend X average than across and It's doing after Pizza whole the tier, Last, recovery rice, part lower-tier but mentioned good remember This are Tier product have very The of example region. launched it's chicken has city. did is Shanghai -- Changsha's team know, business of hub, They tourist lot are is A works target lower. which nice drive Changsha recovering China last living the call, of not to best. to now week China. about enjoy do? recovering and challenged What previous too of

So long of with but new trade of now our way I huge weekday, answer, It's our hope build milestone we team's is to sales sort change It's grow than better the a for for that new view you, Thank you long-term product you skills ability our of thank Xiaopo. to indulging customers. -- gives weekend business. some and me. that actually the

next comes HSBC. Your Lina from with question Yan

clients, year. the to I well walk-through that what of this quarter over the for you nimble thanks points are your market when But reacting detailed your and competition. heard my very I to was Management, very in talk taken the most business are last

new Andy your price provide Obviously, price numbers. the drag some launching you by offerings, might down shared especially point, size. entry more As it ticket

maintain ticket entry-price ASP impact transaction ticket you ticket sales Your that on size, those are stable And like so And number of on offering size. products and Y-o-Y if more affecting margin? quarter-over-quarter of how that, impact what be RMB But enterprise XX a RMB the you on per your a of of the give us relatively can color XX in stable mix? top will wondering offering your what's GP the was very in fourth terms I'm could quarter.

Thank you.

we to ticket little the bit size me years. grow been Let reiterate, and protect have a able even over

and the XX, -- average XXXX. then RMB for XXXX and pre-pandemic, RMB RMB ticket then XXXX is XX, XX RMB XX RMB XXXX So XX

long-term too even So X years, If far we it's trend. back not away. this the another is even go

last always is introduction To price to always our comes this a entry keep beef and mentioned introduction the the stable. the go grew ticket to that trading way, burger, of it's new So -- the product by burger XX% relatively the beef with the specifics, the product. I product by ] of new average product high-priced the [ with strategy also category. year, the the comes

trade helps average beef for like RMB burger for is beef promotions and combo up What try is New for ticket to we XX attractive discount. help by RMB higher to a customers a XX to balance. always even when good – we do having very RMB also burger a So Chinese Year, XX

proportion campaign the ticket particularly Hut purposes now that RMB RMB does X But as moved from ticket doing and it's price will has most the will the huge of is balance customer product, So for more mean By that percentage, combination That's One want one. Point price mass part XXX years product to for and we become see to not a necessarily. price Hut. right customer. become it to now, of offset the margin. go not marketing the incremental X it's stores, X customer to point there. to of need have to it all market, have we entry And to open when we we Pizza Pizza it's point specifically been right way, more because does last about mass we product, entry protect average our more we incremental the X% there, X what more happy of obviously, average. if the a as cater turnaround the attract have run, market, XX purposes, is, the interestingly, it are for over and

and to many looks go small the you how reprice many. one, It business. not about customers menu, reality good. cost with XX would It price cheapest customer above product actually many not for is certain almost It's really Third, right? but a entry years there. actually went the looks the extent. the lowered important. something customer I to people did I'll give affordable think important I the choose? the choose ago good Pepsi to price very because as feels KFC very perception in how If low having the something for still yourself, it, But it good. lowered by will our psyche, that you one ask product example middle, the as it it you coke You perception feel yourself, are in improved

hope chicken I you when products U.S., certain sense as we that costs price the way, down at it dark higher a we us meat. helps way in meat amazing Breast do entry the fantastic to introduce go burger, it's China, well, city product. less. price like By the Tier it's you breast customers. than to how certainly, to recruit But X, treat to Tier will sell X young about particular But product customers our such with can students in as the meat. it SPA Golden So

protect just So margin, we of The the the margin. is margin course, fine.

Lin The Sijie from next comes with question CICC.

lot Hut. I have Andy, Joey, to about competition. the a one so want ask we Pizza about question talked

lower on gain that QX, margin So KFC Hut And and Pizza still we had is quite improvement. margin see labor productivity performance driven we than cost. partially before room the also Hut's rider by there is Pizza good for that lower and mentioned in

and what do reduce we further can So improve efficiency? to else cost

Thank you, Sijie.

value aim from disciplined And year. pricing. for a term long every we including -- and this supply basis. at and our last -- make we then year, introduce what result times, stable again, cost plus/minus past innovate our record, keeping that these Joey many the every has just mentioned, the But for comes generally There all have very and that's around to with keep over very have to our the the provide been to year-over-year minimize it cost as while new using of we years, continuously products to enhance on the so can we because cow focus, And So our chain sales us stable. be at earlier you there. the excellent And team, usage, best to few fluctuation our great part including XX% also be we also, XX%. able consumer markedly effort have times, we many or as track look cost. allowed like chicken said over X% cost when have new quality markedly products [ of the have mentioned our also ] commitment money if a we seasonality we we will [indiscernible] sales is some look and which And to for try

obviously, at cost, overall we're in right Now look now, capital labor a soft cost, we when economy. the

over rate and automation have mentioned manage utilized cost. digital inventory increase. before, to be in technology that of probably the importantly, or AI and scheduling have we would terms more modest productivity year, But we So and like labor you tool assisted enhance more

with to some well RGM or equipment we centralized We the then and efficiency. process try administrative further initiatives, are centralize path like et basically, as a as improve the training, cetera, more also restaurant to of food processing labor streamline to

here the run the aim the long is mostly obviously, term, impacted we Again, short there's long be in to so keep long leverage. emphasis in sales on stable always but run. the it's the the because And to by some labor going fluctuation, in costs term,

compared and earlier, for occupancy and area to where pre-pandemic, KFC almost same we It's points. by mentioned as opportunities. others we same Hut. for I have is an basis Now XXX And Pizza improved

ratio sales to is rent Now X.

we contracts. long-term stock And good then have our also volume. have We optimized

we formats also are flexible more city that lower lot example. a we also in generally And cities, delivery than are ratio. the of the mentioned more as targeting into Joey sales lower cost to Tier terms Changsha efficient also lower rent as X and have is they we As -- takeaway tier that in for rent expand small mentioned rent come then with and

is cost one. depreciating another Now

We work on continue it. to

year, store. You CapEx per RMB new a store our few million million to today was RMB compared X.X can every to around ago, see years has X.X around per like improved it

cost our and et So depreciating also leverage, marketing cetera. improved

So Pizza for obviously, O&O, I think definitely. potentially Hut, opportunity there, labor improvement

very mentioned high As operating we already running have level. a before, at is KFC

the in the So potentially room be improvement for will line. O&O

and an step give take back a me overview again. Let

on resiliency is first, We obviously, Sales remember work we we very -- sells after have work each Pizza since the that. later XXXX Pizza been It and product, the consistent comes the we the work a unit on Turnaround. marketing campaign, economics on you store. of business a when work of embarked the we on Hut profit with model, we strategy on

around sales at to turn building the trade-off, a brand. same-store is Now months of profit the then after the very particularly we we promise, make turn focus always they of do really XX sales profit we the trade-off once beginning sometimes The turnaround the later. first, within because the

profit, And more all we earlier, continue on, it's do want more through side, What cost minute profit. we by went bit you, is It's with details a everyone. that. we'll just bit the a after, to on the later and bit resilience. work on Andy So

other, city challenging resilient better more next brothers scale goal, build business, unfortunately, it's stores, more We to cetera. And all just and than is sales, open of to a et tiers and very resiliency. then KFC. improve -- cost when cetera, course, to resilient each as obviously, going to business even get but with et it's across We X brothers resilient utilize to want a better now the X have to very of normal. rent, Well, of compete our are you get

it So each already, want be got Hut to a than which we profitable Pizza even for we is we quarter quite example, KFC. business, XXXX ourselves, one challenge is seasonal give to seasonal because more

improve only that's the for during to the of how hour day. continue that [ of as quarter well. a So improve the big XXXX, And the employees improve and loss, profitable that And resilience continue like peak remain resources the even we it's and we I slow X that's we you make allocation see the the the then, to because even hour ] shareholders, for can very business, though business just don't not seasonality, and small important but our we'll in quarter.

Your comes with JPMorgan. Kevin question Yin from next

My Andy. and question is on Joey you, the Thank ASP.

Okay.

XX So to is But we'd from which different versus fourth size to it understand before. good. to like a is XX, RMB good quarter better 'XX bit very RMB the if see the was ticket up

like-for-like points. on example, basis, average what for and So by percentage coming down traffic percentage ticket size what KFC a

fourth the same-store margin to sales the what's back, we're in flattish G&A the restaurant thoughts maintain XXXX? growth XXXX. growth quantify secondly, cetera, And sales quarter, the ASP cutting, to okay? And down cost in to if I considering to traffic your contribution in like for the trying your you and maintain just So are level et the XXXX, from same-store level minimum convection also for know

Okay. you questions. your Kevin, thank for

the about on for TC same-store the So difference, was sales bit right? the average to can ticket And size of growth have little KFC, we then transactions, XX%. down the XX%. and XQ by TA X%, a clarification and So increase

XX%, and Hut, For was sales about same-store about ticket change the then growth traffic was the And Pizza then X%. growth X%. was average

product mentioned, market our trend important to then strategy incremental approach the and drive more average and strategy TA point, our reach. And consistent the So offer expand the sales. -- as I the in overall expanding options footprint, it's traffic pricing especially and our ticket consumers Joey store is but our pretty trend as to mentioned with before, is to -- small city

we both the fourth significant and and I XX% transaction, sales on growth there's have system KFC observed growth, also the in So remind grew system in -- and year. overall that everyone, for Hut sales but than as quarter, full for more both both Pizza

So obviously, at look the if number, working sales it's effectively. you our strategy,

of first obviously, look it's Now year-over-year at year ticket XXXX, reopening. average when changes basis, was worth the a that we noting on the

to above very this consistent we and look mentioned in TA fourth important as So we the quarter, RMB at seeing ticket the mind robust which pre-pandemic. in we're the the average an before, have have with And seen KFC, in keep is we third movement. what is when is XX, quarter context

consistent pretty with In in with have consistent sales sales has years. fact, and range contributed we pricing It's robust traffic of that, strong effectively drove Obviously, as coffee movement was strong the ticket year-over-year our mentioned recovery approach past options growth. year, dine-in the coupled performance to the in our over the have average, ticket to very with and this size again, the X KFC. average expand for also breakfast been our earlier, product

bit question. Let this very X Kevin, unusual. for is the and little Andy add me average X can up here quarter about ticket the wrap ticket just quarter a then average not

it's XX%. is back X for is XX%. we one is XXXX which the That's of is quarter out, it quarter XXXX, XXXX The still because was pointed quarter XXXX, XXXX is ticket XX%, year, XXXX, X the XX%. best quarter in average but XX%. X, our X As X go year lockdown, XX%. Andy it's high. just to is If very quarter unusual

we We good the to good protect new by combination even able et way. Therefore, not as we the I through more multiple product, cetera, et leader, market mechanism just that mean the are we're and overall went cetera. et deal not cetera, when TA, across But it's challenges, the years. the different. I to quarter cetera. is getting the detail we the of great a TA are So market is in that with -- good feeling us, to promotional, always have promotion, et during maintain X

At experienced you Joey. time, some that have in because seems long important like mind -- XXXX time to big XXXX but that quarter ago, of a surge also again, we because that it it's it Thank remember, rise. context infection. infection like in this only reopening as -- Like you, very a was labor shortage we fourth keep

high. So XX%, was the then is mix delivery -- which that the time and think ticket, I at very

earlier, And so, Pizza you profitability. look drive to it's sales to, finally, that. And a turning are context the those XXXX enhancing turnaround as then first, Hut, mentioned with at Hut, Joey for then right? and customer which very strategy, If then for strategy Pizza since is consistent traffic, the us

for more suitable dine-in. especially price our that also for for are have that than X to we strategy, And XX RMB subcategory. expanding range, size this results. approach pizza we to by is at individual those less line want offer underserved successfully which met options of goals you much is latest if smaller reach consumers aimed Moreover, is with segments very customer in So our look our

So Thank Kevin. thank you, you.

Your Bank next question of America. with comes Chen from Luo

the and sorry, got to morning. you, although in Andy, call and I Thank a.m. line actually, the now, just my dialed Joey in X:XX at actually disconnected

some previously. questions already forgive So been if asked me have that I ask

on actually it's basically, So margins.

our actually spin-off. X So that the I has for has than even compared XXXX, significantly our higher with so recovered making margin structure noticed to margins level ago, But it slightly margin our XXXX years since third restaurant highest changed. already a

significantly, percentage significantly. risen So others and but of our reduced has our as have occupancy revenue cost, labor a

there of the room channel to given sales introduction labor that have our our future the as the especially stable continued forward, suggests to of us to program. So that as taken we control our is going do as as macro for we check think vendors, [indiscernible], maintain ratio, such lot measures well of a cost, RGM labor a largely recently, rollout

to given a our XX environment. then bps years. And meanwhile, So bps and paper [indiscernible] to and labor a cost, room bps Do very normal whole I XX see has think -- trend the food for it's for do rising to there KFC cost largely by you is opposed promotional the at for as if about look a be RMB we you that then noticed I booked in XX lead for past to us think largely XXXX? And the there's I the going the new guidance labor for excluding But the XX X% the revenue a year group, few cost risen stable now of heard lastly, items. remember, year, of year, OP That flattish the FX, OP. one-off impact. reported And actually you million for level, a entire impact. FX in full one-off last just gain our mid-single-digit may another given and

So decline by is say possibly on actually, XX%-ish. to around that it a OP the fair reported level, may

Of direction, this course, be if decline the I than should everything is going that. the actual hopefully, think better this case. worst is -- in the right be But could

questions. So these are all my

Chen. you, Thank Luo

Kevin, answer question. about your asked -- It's me actually then come sales Let the the one early, and other and same-store I'll that Brian question to and growth.

are now Let our just XXXX. now in right of XX% that store portfolio -- built our after out right me point portfolio

the O&O to for growth O&O, we to reason let's continue -- incredibly -- mainly the a cost drive the and about [indiscernible] first. come sales sales, why So labor but cost cost business. And is we'll our important side, then, talk there's really we system same-store the

-- been a lot customers. of are all savings operating best the food to principle to pass have we getting our always with We a the customer, that pass savings sincere about the guiding

at years, very So very, if cost few sales a last has stable challenging through look been very time of better stable, the it more you our over or time.

savings XXXX, XXXX, with It's the time, we well, to XXXX less because XX.X%, through XXXX, around or swing the XXXX, pre-pandemic pass pre-pandemic XX.X%, customer food. we always than XXXX, even is X% whenever have XX.X%, -- throughout there like start really XXXX, XX% savings, XX%. I again if the So XX.X%,

that sales be my above team will So number, around stay that. they myself, you significantly cost of that hard a time and the have for we'll know they because continue if XX%, can goes assured to very all below

south cetera, the year like year, increased in these cost Cost of yes, all of lot I cost XX labor, labor going U.K. the of of out there of during sort labor even is et even up. years, in I of always when cost was And Second is X-year XX spent was going because cetera, has et still going years will insurance costs up. the and say, labor. are up. GDP this the a a are going it sort

to more been help we which because that, to you them we forward, have service one productive, every well. for want best best year from can our ways customers. from hopefully find provide doing stores. we really now that cetera, see depreciation, that pay XX%, we as up to et has XX% go to the to XX.X% could from is we last have have we store the everything rent, and going from become at this far and save, them we staff our staff, and We then managing give points, even is et pay, staff multiple run go O&O, we pay XX%, we the business, So to as gone then good It the our generate health XX%, to and X insurance, up savings them cetera, pass a few way savings years. And XXXX staying fair

will So continue we'll the be to that direction drive.

In cannot terms I'm OP, our beyond capability. company's foreign cetera, forecast of as result, et a that. sorry, exchange, It's

do as good you, Chen. our Lou a Thank and to then produce we'll the manage to of So everything result could and result, we costs generate sales effort.

the now Thank you. questions closing Ms. to That for I'll time remarks. back is today. have for Shen we all hand

call you, the Thank today. you, for Ashley, joining and everyone, thank

great release questions, contact For our Have in information further website. reach a day. earnings please in our the through out

Thank you. Bye-bye.

you. Thank

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

disconnect. now may You