Yum China (09987.HK): Same-store sales only flat year-on-year, growth mainly driven by store expansion.

$YUM CHINA(09987.HK) : In the first quarter of 2026, total revenue reached $3.3 billion, a year-on-year increase of 10%. Operating profit grew by 12% to $447 million, setting a new record for the first quarter, with the operating profit margin improving to 13.7%. Diluted earnings per share rose by 13% to $0.87. However, despite a 4% growth in system sales, same-store sales were only flat compared to last year, indicating that growth was primarily driven by store expansion. The company returned $316 million to shareholders this quarter, steadily advancing its annual $1.5 billion return plan.

In terms of business segments, KFC revenue grew by 9%, with same-store sales up slightly by 1%; Pizza Hut's operating profit increased significantly by 18%, but same-store sales declined slightly by 1%. Net new store openings reached 636 during the period, a record high for a single quarter, bringing the total store count to 18,737. Delivery business performed strongly, with sales up 31% year-on-year, accounting for 54% of restaurant revenue. Notably, due to increased delivery rider costs and the implementation of a value-for-money product strategy, the overall restaurant profit margin decreased by 40 basis points year-on-year to 18.2%.

Looking ahead to the full year, the company targets net new store openings exceeding 1,900, pushing the total past the 20,000 mark. While the CEO is optimistic about the consumption recovery, he acknowledges that holiday shifts and the macro environment continue to affect social dining patterns. As market competition intensifies and cost pressures persist, the company needs to rely on operational streamlining and automation to offset profit dilution risks. In summary, Yum China still faces the challenge of balancing aggressive expansion with profit management, and its future performance will depend on the execution of its "Innovation and Efficiency" strategy.

Source: KGI Securities