Breakingviews

Yum China fries up bucket of consumption woes

2 minute read

Yum China CEO Joey Wat poses for a picture in Shanghai, China March 12, 2019. REUTERS/Aly Song - RC1BAB7FCE00

HONG KONG, Sept 15 (Reuters Breakingviews) - Yum China (9987.HK) has bad news for China’s economy. The $26 billion operator of Pizza Hut, KFC and Taco Bell in the People’s Republic warned read more that the rapid spread of the Delta variant would cause its adjusted operating profit to drop by about 50-60% year-on-year in the third quarter. The recent outbreak, which has impacted 16 provinces, per Yum, has officials in China locking back down, even though Reuters Covid Tracker shows the country is reporting an average of 39 new cases per day, 1% of the peak, with no deaths reported since April. Nevertheless Yum either closed or halted dine-in service at more than 500 stores in August.

Chinese retail sales rose by a meagre 2.5% in August from a year ago, much slower than expected, and surveys showed the services sector – of which restaurants are a part – went into monthly contraction. This puts Yum’s expansion schedule into question. It is sticking with plans to open 1,300 new stores this year. But if lockdowns are to become a regular occurrence, Yum – and its restaurant peers – could regret not conserving cash. (By Sharon Lam)

On Twitter http://twitter.com/breakingviews

Capital Calls - More concise insights on global finance:

Amazon pay rise shows changing inflation dynamics read more

De Longhi’s share sale calls peak coffee read more

German property mega-deal goes from bad to worse read more

Grab hints at Southeast Asia’s economic pain read more

Fake Walmart-Litecoin news cries for regulation read more

Editing by Antony Currie and Katrina Hamlin

Breakingviews
Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.

More from Reuters