Yum China (YUMC) Q2 Earnings Top, Revenues Lag, Rise Y/Y

Earnings & Revenue - Adjusted earnings per share of 55 cents beat the Zacks Consensus Estimate of 47 cents by 17%, with a 17% year-over-year increase [2] - Total revenues of $2.68 billion missed the consensus mark of$2.77 billion by 3.3%, but inched up 1% year-over-year [2] - Excluding foreign currency translation, revenues increased 4% year-over-year [2] - Total system sales (excluding foreign currency translation) increased 4% year-over-year, driven by an 8% net new unit contribution [2] - KFC system sales increased 5% year-over-year, while Pizza Hut system sales increased 1% year-over-year [2] - Same-store sales reached 96% of the previous year's level, with same-store transactions growing 4% year-over-year [2] Operating Performance - Total costs and expenses amounted to $2.413 billion, compared to$2.397 billion in the prior-year quarter [3] - Restaurant margin was 15.5%, down from 16.1% a year ago [3] - Adjusted operating profit totaled $266 million, up from$259 million a year ago [3] - Adjusted net income amounted to $212 million, compared to$199 million in the prior-year quarter [3] Balance Sheet & Shareholder Returns - Cash and cash equivalents were $1.043 billion as of Jun 30, 2024, down from$1.128 billion as of Dec 31, 2023 [4] - Net inventories were $362 million, compared to$424 million as of Dec 31, 2023 [4] - The company repurchased 5.1 million shares for $187 million in the second quarter [4] - As of Jun 30, the company had$666 million available for future share repurchases under the current authorization program [4] - A quarterly cash dividend of 16 cents per common share was declared, payable on Sep 17, 2024 [4] Unit Development & Digital Performance - Yum China opened 401 net new stores in the second quarter, bringing the total restaurant count to 15,423 [5] - KFC stores totaled 10,931, while Pizza Hut stores reached 3,504 [5] - Delivery contributed approximately 38% to KFC and Pizza Hut's company sales [5] - Digital orders accounted for about 90% of total company sales, with 89% for KFC and 93% for Pizza Hut [5] - Loyalty programs of KFC and Pizza Hut grew to more than 495 million members [5] 2024 Outlook - Yum China projects net new store openings to be in the range of 1,500-1,700 [6] - Capital expenditures are projected to be between $700 million and$850 million [6] Industry Updates - The Wendy's Company reported dismal second-quarter fiscal 2024 results, with earnings and revenues missing estimates, despite solid same-restaurant sales and digital sales momentum [7] - Shake Shack Inc posted decent second-quarter fiscal 2024 results, with earnings meeting estimates and revenues beating them, driven by product innovations and strategic menu pricing [8] - The Cheesecake Factory Incorporated reported second-quarter fiscal 2024 results, with earnings beating estimates and revenues missing them, benefiting from strong demand and new restaurant openings [9]