Why Restaurant Company Yum China's Shares Are Diving Today

Restaurant company Yum China Holdings Inc YUMC shares are trading lower by over 12% after it reported Q3 FY23 results.

Revenues increased 9% Y/Y to $2.91 billion (+15% Y/Y in constant currency [c.c.]), missing the consensus of $3.06 billion.

System sales rose 15% Y/Y, with increases of 15% at KFC and 13% Y/Y at Pizza Hut in c.c, led by new unit contribution, same-store sales, and lapping of temporary closures in the prior year.

Same-store sales grew 4%, with increases of 4% at KFC and 2% at Pizza Hut in c.c.

Adjusted operating profit was up 3% Y/Y to $327 million (+10% Y/Y in c.c.).

Adjusted EPS increased 20% Y/Y to $0.59, missing the consensus of $0.68. 

As of September 30, 2023, the company opened 500 net new stores in Q3, and the total store count reached 14,102.

The company had cash and equivalents of $3.1 billion at the end of Q3.

In Q3, YUMC repurchased around 2.9 million shares worth $157 million. As of September 30, 2023, the company had about $870 million in shares remaining under the current authorization.

The Board declared a cash dividend per share of $0.13, payable on December 19, 2023, to shareholders of record as of November 28, 2023.

The company's fiscal year 2023 targets were updated at Investor Day on September 14, 2023. YUMC expects to open about 1,400 to 1,600 net new stores, an increase of 300 stores from the previous target. The company continues to expect capital expenditures of around $700 million to $900 million.

Related: Yum China Plans Post-Pandemic Binge With Major Expansion

In September 2023, the company launched a refreshed RGM 2.0 strategy and targets to achieve a high-single-to-double-digit CAGR for system sales and operating profit as well as double-digit EPS CAGR from 2024 to 2026 vs. base year 2023 and in c.c. 

Also Read: Yum China Leverages Technology To Expand Stores Without Adding More Staff: Report

Price Action: YUMC shares are down 12.48% at $46.00 premarket on the last check Wednesday.