Yum China Membership Tops 360 Million as KFC and Pizza Hut Add 1,567 New Stores

This is an English adaptation of a FoodBud historical article originally published on February 8, 2022.

Yum China reported its fourth-quarter and full-year 2021 results on February 9. CEO Joey Wat said the company ended 2021 with more than 360 million members, up 20% year over year, and generated more than $7 billion in full-year sales from digital orders, representing over 85% of company restaurant revenue.

The company added more than 1,200 net new stores during the year, a record. KFC set a new-store opening record, while Pizza Hut recorded its highest number of new openings since 2016. Lavazza expanded from 4 stores to 58 stores. Yum China said it remained committed to its long-term goal of reaching 20,000 stores.

For 2022, the company guided for 1,000 to 1,200 net new stores and capital expenditure of $800 million to $1 billion, including increased investment in supply chain, infrastructure, and digital capabilities.

Digital and Delivery

At the end of 2021, KFC and Pizza Hut had more than 360 million members across their loyalty programs. In the fourth quarter of 2021, member sales accounted for about 60% of system sales.

Delivery revenue represented about 35% of KFC and Pizza Hut company restaurant revenue in Q4 2021. Delivery rose by about six percentage points from the same period in 2020, as COVID-19 case counts increased.

Digital orders, including delivery, mobile orders, and kiosk orders, accounted for about 88% of KFC and Pizza Hut company restaurant revenue in Q4 2021.

Q4 2021 Highlights

In December 2021, Yum China completed the acquisition of a 28% equity interest in Hangzhou Catering Services Group for approximately $255 million in cash. After the transaction, Yum China directly and indirectly held about 60% of the Hangzhou KFC joint venture.

Hangzhou KFC’s results were consolidated from December 2021. Yum China remeasured its previously held equity interest in Hangzhou KFC at fair value and recorded a $618 million non-cash gain.

Key Q4 figures included:

• Total revenue was $2.29 billion, up 1% from $2.26 billion a year earlier, or down 2% excluding foreign currency translation.
• System sales declined 3% year over year, with KFC down 3% and Pizza Hut down 2%, excluding foreign currency translation.
• Same-store sales declined 11% year over year, with KFC down 12% and Pizza Hut down 8%, excluding foreign currency translation.
• The company opened 563 gross new stores, or 373 net new stores.
• Restaurant margin was 7.5%, compared with 15.1% a year earlier, mainly due to lower same-store sales from intensified COVID-19 impacts.
• Operating profit increased to $633 million from $180 million a year earlier, mainly due to the $618 million non-cash gain from remeasuring the Hangzhou KFC stake.
• Adjusted operating profit was $16 million, down 91% year over year, or down 92% excluding foreign currency translation.
• Net income increased to $475 million from $151 million a year earlier, mainly due to higher operating profit, partly offset by mark-to-market losses on the company’s equity investment in Meituan Dianping.
• Adjusted net income was $11 million, down 93% from $153 million a year earlier. Excluding the $9 million net loss from the Meituan Dianping mark-to-market equity investment in Q4 2021 and the $23 million net gain in Q4 2020, adjusted net income declined 85%; it also declined 85% excluding foreign currency translation.

Full-Year 2021 Highlights

For the full year, Yum China opened 1,806 gross new stores, or 1,282 net new stores, reaching 11,788 total stores as of December 31, 2021.

Key full-year figures included:

• Total revenue was $9.85 billion, up 19% from $8.26 billion in 2020, or up 12% excluding foreign currency translation.
• System sales increased 10% year over year, with KFC up 8% and Pizza Hut up 14%.
• Same-store sales declined 1% year over year, with KFC down 3% and Pizza Hut up 7%.
• Restaurant margin was 13.7%, compared with 14.9% in 2020.
• Operating profit was $1.39 billion, up 44% from $961 million in 2020, or up 34% excluding foreign currency translation, mainly due to the Q4 non-cash gain from remeasuring the Hangzhou KFC stake.
• Adjusted operating profit was $766 million, up 5% from $732 million in 2020, or down 2% excluding foreign currency translation.
• Net income was $990 million, up 26% from $784 million in 2020, mainly due to higher operating profit, partly offset by mark-to-market equity investment losses.
• Adjusted net income was $525 million, down 15% from $615 million in 2020. Excluding the $52 million net loss from mark-to-market equity investments in 2021 and the $75 million net gain in 2020, adjusted net income increased 7%; it declined 1% excluding foreign currency translation.

Note: 2022 guidance, the 20,000-store target, equity investment figures, and acquisition-related figures are historical disclosures from the 2021 results period.