Yum China Holdings Inc (YUMC) Q3 2025 Earnings Call Highlights: Strong Store Expansion and ...

This article first appeared on GuruFocus.

System Sales Growth: 4% year over year. Same Store Sales Growth: 1% year over year. Restaurant Margin: Expanded to 17.3%. Operating Profit: $400 million, an 8% increase year over year. Net New Stores: 536 net new stores in Q3. Total Store Count: Exceeded 17,500 stores. KFC Same Store Sales Growth: 2%. Pizza Hut Same Store Transaction Growth: 17% for three consecutive quarters. Delivery Sales: Accounted for 51% of total sales, up from 40% in the same quarter last year. Net Income: $282 million, 5% lower year over year. Diluted EPS: $0.76, 1% lower year over year. Cash Position: $2.7 billion in net cash as of the end of Q3. Shareholder Returns: $950 million returned year-to-date, including $682 million in share repurchases and $268 million in dividends.

Warning! GuruFocus has detected 1 Warning Sign with YUMC. Is YUMC fairly valued? Test your thesis with our free DCF calculator.

Release Date: November 04, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Yum China Holdings Inc (NYSE:YUMC) achieved a 4% year-over-year growth in system sales, outpacing the China restaurant industry. The company expanded its restaurant margin to 17.3%, contributing to an 8% year-over-year increase in operating profit to $400 million. Yum China Holdings Inc (NYSE:YUMC) accelerated store openings with 536 net new stores, bringing the total to over 17,500 stores. Pizza Hut achieved 17% same-store transaction growth for three consecutive quarters, highlighting the success of its pricing strategy. KFC opened a record 402 new stores in the third quarter, expanding its portfolio to 12,640 stores.

Negative Points

The average ticket price at KFC decreased by 1% due to the rapid growth of smaller orders. Net income was 5% lower year over year, impacted by an $8 million negative effect from the investment in Meituan. The cost of labor increased by 110 basis points year over year, driven by higher delivery mix and wage inflation. The effective tax rate increased by 30 basis points year over year to 27.6%. The company faces challenges in maintaining same-store sales growth amid cautious consumer spending and competitive market dynamics.

Q & A Highlights

Q: Can you share more on the impact of delivery platform subsidies on Yum China and the market, and any strategic options for Pizza Hut? A: Joey Wat, CEO: We've observed a decrease in subsidies on delivery platforms, particularly in coffee and tea, but only a slight decrease in QSR. We expect limited impact on us as we maintain a strategic focus on sales growth while protecting margins. Long-term, subsidies will normalize, so we focus on menu innovation and quality. Regarding Pizza Hut, Adrian Ding, CFO, noted that Yum Brands is reviewing strategic options, but Yum China remains confident in Pizza Hut's growth potential in China.

Story Continues

Q: What is the macro perspective on the restaurant industry in China and consumer spending? A: Joey Wat, CEO: The macro environment in Q3 was positive, with good traffic during holidays, but consumers remain cautious. Lower-tier cities performed slightly better due to domestic travel. We focus on providing value for money, quality food, and emotional value to drive same-store transaction growth and operational efficiency.

Q: Can you discuss the expansion strategy focusing on smaller formats and franchise stores? A: Adrian Ding, CFO: The system sales growth ratio to store count growth won't necessarily remain at 40% due to strategic optimizations like closing larger stores and opening smaller ones. New stores initially have lower sales but ramp up over time. Franchise economics are improving, with margins slightly lower than equity businesses but expected to align over time.

Q: How is the delivery order mix affecting costs, and what initiatives are in place to manage this? A: Adrian Ding, CFO: The increase in aggregator mix has mechanically reduced disclosed membership sales contribution. We're optimizing delivery efficiency and streamlining operations to offset higher delivery costs. Despite headwinds, we're committed to improving margins and operational efficiency.

Q: What are the strategic plans for new store formats and categories like K Pro and Fried Chicken Brothers? A: Joey Wat, CEO: We focus on growth initiatives like K Pro and K Coffee, leveraging front-end segmentation and back-end consolidation for operational efficiency. We explore promising categories like fried chicken and alternative options, ensuring synergy with existing businesses. New concepts undergo trials to determine viability.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

View Comments