Yum China's Record-Breaking 2023: Growth, Expansion, and Digital Sales
2024-02-08
Yum China's fourth quarter and fiscal year 2023 earnings conference call took place on February 6, 2024, with CEO Ms. Joey Wat and CFO Mr. Andy Yeung participating. During the call, they discussed various topics related to the company's financial achievements in 2023, their growth and expansion strategies, and their focus on improving profitability and efficiency.
In 2023, Yum China achieved record-breaking revenue of 11 billion and witnessed a 21% year-over-year growth in system sales. The company also reached an all-time high operating profit of 1.1 billion (excluding special items), with core operating profits growing by an impressive 79%. Additionally, Yum China opened a record 1,697 net new stores, expanding their total store count to 14,644. KFC alone reached 10,296 stores, while Pizza Hut reached 4,348 stores in 2023.
KFC has set a target to expand its reach to half of the Chinese population by 2026. To achieve this, the company plans to increase store density in existing cities and enter new ones. Currently operating across 2,000 cities in China, KFC sees opportunities in lower-tier cities due to urbanization and long-term consumption upgrades. Consumers in these cities possess significant purchasing power.
Pizza Hut, on the other hand, has focused on addressing the underserved market segment by launching entry-priced pizzas and targeting the under RMB 50 market. The company has also improved its delivery pricing structure to capture incremental traffic, particularly from more price-sensitive customers. In 2023 alone, Pizza Hut added 409 stores and has been working on enhancing its performance.
Both KFC and Pizza Hut have successfully utilized digital sales channels to drive sales. KFC's digital sales surpassed $9.2 billion in 2023, thanks to collaborations with major e-commerce and social media platforms. The company has also implemented loyalty programs, which have exceeded 417 million members and contribute a record 65% of their sales. Pizza Hut has also focused on digital marketing and advertising to boost its sales.
Yum China remains optimistic about the growth opportunities in China and plans to open 1,500 to 1,700 net new stores by 2024. The company aims to achieve a high single-digit to double-digit compound annual growth rate in system sales and operating profits from 2024 to 2026. Yum China's focus lies in rebasing their cost structure, efficient cost management, and providing value and quality products to attract customers.
Overall, Yum China's earnings conference call covered various important business topics, including their financial achievements, growth strategies, expansion plans, digital sales channels, and cost management. The company is optimistic about the future and remains committed to generating long-term sustainable value for its shareholders.