Yum China sales rose 12 per cent in the quarter to June 30, boosted by more stores and currency gains.

But same-store sales declined across both of its brands and margins contracted.

The company reported total sales of US$2.1 billion which on a currency-neutral basis was 5 per cent better than for the same quarter last year. KFC sales rose 5 per cent, partially offset by a 1 per cent decline by Pizza Hut.

However, same-store sales declined 1 per cent year-on-year, with flat same-store sales at KFC and a 4 per cent decrease at Pizza Hut.

During the period, Yum China opened 164 stores, taking its network to 8198 across more than 1200 cities.

Operating profit rose 13 per cent to $193 million (or by 5 per cent excluding foreign exchange effects).

Joey Wat, CEO at Yum China, said the growth was driven by “solid business fundamentals and accelerated new store development”.

“We are on track to add 600-650 new stores, led by KFC, by the end of the year. This strategy will set us up for long-term growth in both profitability and market share,” she said.

While Pizza Hut continued to face challenges in China’s competitive casual dining space, Yum China added new talent to its team and is working on repositioning the brand with its target customers.

“We remain dedicated to revitalising the brand and strongly believe that our initiatives including delivering more innovative products and introducing new store formats will restore the brand to the level of consistent growth that our shareholders expect,” said Wat.

Jacky Lo, CFO at Yum China, said the company stepped up food investment and promotional activities during the quarter, which inevitably had some impact on its margins.

“This reflects our strategic decision to invest in our brands for long-term market share gain.”

Inside Retail Asia