Yum China's Q4 Earnings: Revenue Growth and Dividend Increase

Yum China Holdings, Inc. (NYSE:YUMC) has seen its shares increase on Thursday following the release of its fourth-quarter earnings for fiscal year 2024.

The company reported a 4% increase in revenue compared to the same quarter last year, reaching $2.595 billion. However, this figure fell short of analysts' expectations, which had estimated revenue to be $2.631 billion.

Looking more closely at the overall performance, total system sales also rose by 4% year over year when excluding the effects of currency fluctuations. This growth was primarily driven by a 5% increase in the number of new units opened.

Yum China's same-store sales reached 99% of last year's level, indicating a 4% increase in transactions during the quarter. This demonstrates a steady demand across its brands.

Breaking it down by brand, KFC experienced a 5% growth in system sales, with delivery sales rising by 16%. Remarkably, delivery accounted for approximately 42% of KFC’s total sales. Similarly, Pizza Hut recorded a 3% increase in system sales, with delivery sales growing by 6%, also representing 42% of its overall sales.

In terms of profitability, Yum China's core operating profit surged by 35%, with margins improving by 140 basis points, reaching 5.8%, compared to 4.4% in the same quarter last year. Additionally, the adjusted earnings per share (EPS) came in at $0.30, surpassing the consensus estimate of $0.29.

As of December 31, 2024, the company reported holding $1.8 billion in cash and equivalents, with an operating cash flow of $1.4 billion for the past twelve months. Over the past year, Yum China opened a total of 534 net new stores, bringing the total number of locations to 16,395.

Returning value to shareholders, Yum China announced it had returned $1.5 billion in capital for the entire year, including $248 million in the fourth quarter. The company still has approximately $1.3 billion available for share repurchases under its current buyback authorization.

Dividend Increase

In a significant move, the Board of Directors declared a 50% increase in the cash dividend, raising it to $0.24 per share. This dividend will be payable on March 27, 2025, to shareholders recorded as of March 6, 2025.

Share Buyback Initiatives

Yum China has also initiated share repurchase agreements in both the U.S. and Hong Kong, with a total buyback amount of approximately $360 million planned through open market transactions for the first half of 2025. The company aims to return $4.5 billion to its shareholders from 2024 to 2026.

CEO's Insights

Joey Wat, the CEO of Yum China, remarked, “We have steadily improved our metrics since the second quarter, with improvement in same-store sales index, margins, and operating profit growth each quarter. These results demonstrate the resilience of our business and the effectiveness of our strategy in improving sales and profitability amid challenging market conditions.”

Looking forward, Wat expressed excitement about growth opportunities in China, stating that the company is expanding through both company-owned and franchised stores, aiming for a total of 20,000 stores by 2026.

Future Outlook

For fiscal year 2025, Yum China has set a target of opening approximately 1,600 to 1,800 net new stores, alongside capital expenditures ranging from $700 million to $800 million. The company anticipates returning another $3 billion to shareholders over the period from 2025 to 2026.

Furthermore, Yum China expects its franchise mix of new stores to gradually change, aiming for 40-50% for KFC and 20-30% for Pizza Hut over the coming years.

Stock Performance

As a result of these announcements, Yum China’s shares are trading up by 7.56%, reaching $48.96.

Yum, Earnings, Dividend