Yum China says same-store sales fall slowing, with April down 10%

(Reuters) - Yum China Holdings Inc YUMC.N on Tuesday beat estimates for quarterly revenue and said the decline in same-store sales was slowing even as the vast majority of consumers still avoid going out in public to contain the spread of the coronavirus.

Yum China said its month-to-date same-stores sales were down by more than 10%, still an improvement from the 15% decline it experienced in the first quarter ended March 31.

Shares of Yum China, the exclusive licensee of the KFC, Pizza Hut and Taco Bell brands in China, rose 3.3% in extended trading.

The coronavirus-led lockdown turned major Chinese cities into ghost towns as people avoided visiting restaurants, forcing Yum China to roll out contactless delivery and pickup at its KFC and Pizza Hut locations to curb falling sales.

Digital orders - including delivery, mobile orders and kiosk orders - accounted for 84% of sales at KFC and 65% of sales at Pizza Hut in the first quarter, an increase of 29 and 36 percentage points, respectively, from a year earlier.

Total revenue fell to $1.75 billion from $2.30 billion but well ahead of market expectations of $1.56 billion.

Net income fell to $62 million, or 16 cents per share, from $222 million, or 57 cents per share, a year earlier.

However, Chief Financial Officer Andy Yeung said restaurant traffic is still below pre-outbreak levels.

“We expect an extended recovery period, and that the pace will be uneven across regions, dayparts and segments.”

Chief Executive Officer Joey Wat told analysts on a conference call that Pizza Hut was more seriously affected versus KFC due to the former’s larger focus on dine-in. The firm’s third quarter could also be impacted by a planned shortening of the country’s summer school vacation, she said.

“2020 is going to be a very challenging year,” she said.

The company plans to roll out more value-for-money choices in view of how consumers may tighten their belts further in the post-pandemic era, she said. In February, it added tea eggs, a traditional Chinese snack, priced at 7 yuan ($0.9887) to its menu.

Yum China also said it will suspend its share repurchases and dividends for the next two quarters, citing the impact of the coronavirus outbreak and economic uncertainty.

The rapid spread of the coronavirus prompted restaurants, including McDonald's Corp MCD.N and hotpot chain Haidilao International Holding Ltd 6862.HK, to close temporarily or cut working hours to contain the spread of the virus.

Yum China said about 99% of its stores in China are either partially or fully open.

It also reaffirmed its plans to open 800 to 850 new stores in the country in 2020.

Reporting by Praveen Paramasivam in Bengaluru and Sophie Yu in Beijing; Editing by Maju Samuel and Christopher Cushing