With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

Fortune 500

These companies use the creative forces of capitalism to solve big problems—and do well by doing good.

<p>According to the United Nations, one-fifth of the total food available to consumers—about 290 pounds (132 kg) per year for every person on the planet—goes to waste. Redistributing that surplus food can be both a lifesaving benefit for the food-insecure, and a solution to an environmental problem (since decaying food emits greenhouse gases). In 2020, Yum China—which operates roughly 17,000 KFC and Pizza Hut fast food outlets across China and brought in $11.3 billion in revenue in 2024—launched its Food Bank program, distributing surplus food to those in need. Over 1,000 stations in over 180 cities have saved more than 1,600 tons of food, enough to feed 4,000 people for a year, since the program’s launch. Yum China’s success was included as a case study in how China’s new charity law, which encourages more charitable activities to be community-based, was implemented. Food waste is a priority for the company: Yum China wants to reduce its food waste by 10% by 2030, compared with its 2020 baselines.
</p>

Change the World

Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

Industries included in the sector are food services and hotels and casinos.

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CTW-2023-Yum china

China’s rapid development has focused more on its cities than its countryside, with urban disposable incomes almost 2.5 times greater than rural ones. Yum China—China’s largest restaurant manager, and operator of brands like Kentucky Fried Chicken and Pizza Hut in the country—launched its One Yuan Donation program over 15 years ago with a simple appeal to customers to donate just one yuan ($0.14) toward rural causes. The campaign as a whole has channeled over $30 million to rural development initiatives, and now the company’s efforts have expanded to include “grow local” schemes to introduce regional produce, from Yunnan truffles to Tartary buckwheat, to its e-commerce platforms and menu items. (The campaign also now encourages much larger donations.) Yum China is also striving to reduce its food waste and carbon emissions, in part by establishing food banks to distribute excess food to the local community.

The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

This year’s Fortune 500 marks the 68th running of the list.

This year’s Fortune 500 marks the 67th running of the list.

F500-2021-363-Yum China Holdings

The spin-off company of Yum! Brands has a workforce of 271,000 employees. It's incorporated in the United States while its operational headquarters is in Shanghai. The company has the exclusive right to operate the KFC, Pizza Hut, and Taco Bell brands in China.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-361-Yum-China-Holdings

The fast food restaurant company separated from Yum! Brands in 2016 to solely focus on growth of the KFC, Pizza Hut, and Taco Bell brands in China. While its operations are mostly in China, it is incorporated in the U.S. and maintains a headquarters in Texas.

Here are the World's Most Admired Companies for 2019 as ranked in their industries. See who made the list.

This year's Fortune 500 marks the 65th running of the list.

This year's Fortune 500 marks the 64th running of the list.

This year's Fortune 500 marks the 63rd running of the list.

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Change The World

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Yum China operates over 16,000 Kentucky Fried Chicken and Pizza Hut outlets, among other brands, across China, making it the country’s largest restaurant company. Born from Yum Brands’ 2016 decision to spin off its China operations into an independent company, Yum China now generates more revenue than its erstwhile U.S. parent. Yum China is now experimenting with more locally inspired fare, while foraying into China’s second- and third-tier cities to reach new markets. Yum China is one of a few Fortune 500 companies to generate almost all of its revenue outside the U.S.

Q2 2026

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Q4 2024

Yum China Holdings (YUMC): Company Profile, Stock Price, News, Rankings

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Yum China Holdings

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day and thank you for standing by. Welcome to the Yum China Fourth Quarter and Fiscal Year twenty twenty four Earnings Conference Call and Webcast. At this time, all participants are in listen only mode. After the speakers' presentation, there will be a question and answer session. Please note that today's conference is being recorded.

I would now like to hand the conference over to your speaker, Florence. Please go ahead.

Thank you, operator. Hello, everyone. Thank you for joining Yum China's Fourth Quarter twenty twenty four Earnings Conference Call. On today's call are our CEO, Ms. Joey Wok and our acting CFO, Mr.

Adrian Ding. I'd like to remind everyone that our earnings call and investment materials contain forward looking statements, which are subject to future events and uncertainties. Actual results may differ materially from these forward looking statements. All forward looking statements should be considered in conjunction with the cautionary statement in our earnings release and the risk factors included in our filings with the SEC. This call also includes certain non GAAP financial measures.

You should carefully consider the comparable GAAP measures. Reconciliation of non GAAP and GAAP measures is included in our earnings release, which is available to the public through our Investor Relations website located at ir.yangchina.com. You can also find the webcast of this call and our PowerPoint presentation on our IR website. Please note that during today's call, all year over year growth results exclude the impact of foreign currency unless otherwise noted. Now I would like to turn the call over to Joey Watt, CEO of Yum China.

Hello, everyone, and thank you for joining us. We just celebrated Chinese New Year last week. I want to wish everyone a happy and healthy year of the Snake. I'm excited to share that we achieved another quarter of strong results in quarter four, capping a record breaking year.

In the fourth quarter, system sales grew 4% year over year, outperforming the industry. Same store sales index sequentially improved to 99% of prior year levels. Restaurant margin and OP margin expanded significantly year over year. Core operating profit grew 35%. For the full year, we set multiple new records.

We opened a record seventeen fifty one net new stores, ending the year with 16,395 stores. Adjusted operating profit reached $1,200,000,000 Core OP increased 12% and dilute EPS grew 22. Our due focus on operational efficiency and innovation led to improvement in both the top and bottom lines. Despite a challenging environment and value minded consumers, our efforts have led to eight consecutive quarters of positive transaction growth. We have sequentially improved the same store sales index and expanded margins since quarter two.

KFC has shown considerable resiliency and growth momentum. KFC accelerated store openings and reached 2,200 plus cities in China. Delivery sales grew 16%, continuing our decade long double digit annual growth momentum. 2024 feels to me like an inflection point for Pizza Hut. It has made significant progress in transforming itself by enhancing its mass market appeal and operational efficiency.

Core OP more than tripled in quarter four and grew 19% for the full year. Both brands have tapped into underserved markets and expanded into adjacent categories to drive incremental traffic, sales and profit. Our breakthrough models, K Coffee Cafe and Pizza Hut Wow showed promising results and have significant potential for further growth. I want to thank our incredible team for delivering these strong results. Embracing our people first culture, we celebrated our achievements with over 11,000 restaurant managers at our RGM convention in Hong Kong.

We continue to delight our customers with great food and excellent value for money, and we are grateful to our shareholders for your continued support. With that, let me turn the call over to Adrian to discuss our results in detail. Afterward, I will share additional highlights on our CNY activities and our strategy. Adrian?

Thank you, Joey, and happy Chinese New Year, everyone. In 2024, all of our brands made notable progress. Let me share some color by brand. I'll start with KFC, which consistently delivered strong performance. In 2024, KFC grew system sales by 6%, exceeding industry levels.

We have developed innovative products for our flagship categories of original recipe chicken and juicy whole chicken, resulting in double digit sales growth. We have also expanded our delivery market share on aggregator platforms by capturing more smaller orders. At the same time, we improved rider efficiency and further enhanced customer experience. KFC opened a record thirteen fifty two net new stores in 2024, bringing our total store count to 11,648. Our flexible models enable us to broaden our reach with a mix of company owned and franchised stores.

We added nearly 1,000 company owned net new stores in 2024. The payback period for our new stores remained healthy at two years. Thirty percent of KFC's net new stores were franchised stores. They helped us unlock incremental opportunities in lower tier cities, remote areas and strategic locations such as highways, campuses and tourist areas. KFC's growth potential in China is huge.

Coffee is a key growth driver for KFC. In 2024, KFC sold two fifty million cups of KFC, marking 30% growth. Our breakthrough K Coffee Cafe model expanded from around 50 cafes in 2023 to 700 cafes in 2024. We plan to expand the model to 1,300 locations by the end of twenty twenty five. KFC and K Coffee Cafe generate good synergies, driving incremental sales and profit.

In terms of product innovation, aside from our signature fruity sparkling coffee, this winter, we launched the Handshaken Americano with Frozen Pear. The drink features a real frozen pear, a traditional Northern Chinese delicacy and has generated significant social buzz. Pizza Hut has made substantial progress in becoming more affordable for customers and profitable for our company. In 2024, Pizza Hut achieved the highest level of OP and RMB since our spin off. Same store transactions grew 5%.

Restaurant margin expanded by 60 basis points on a comparable basis. Pizza Hut also opened a record of four twelve net new stores, bringing the total to 3,724 stores. Pizza Hut's payback period for new stores improved from three years in 02/2003 to two to three years in 2024. We're transforming Pizza Hut into a more mass market brand by widening price range and enriching the menu. Sales of pizza priced under KRW50 increased 50% year over year.

Pizza dough burgers, a new category we launched in April, has already reached a low single digit percentage of our sales mix, showing good potential. As Pizza Hut expanded the addressable market, we also streamlined operations to improve efficiency. We managed to reduce our cost of labor by 110 basis points in 2024. Our breakthrough Wow! Model is gradually maturing, exceeding 200 stores in 2024.

Sign in sales saw solid growth, while delivery sales also improved. While stores attract younger customers and meet functional needs, expanding Pizza Hut's addressable market. Although the ticket average is lower by design due to smaller party sizes and lower per person spending, We successfully drove transaction growth. Margins have improved since launch. We'll continue to refine the Wow model and expand to more locations in 2025.

Levaza continued to grow with few growth engines of coffee shops and retail businesses. Store economics have meaningfully improved due to better operational efficiency and reduced new store capital expenditure. The retail segment saw sales growth of over 30% and became profitable in 2024. We've made good progress in building appreciation for Lavazza's coffee expertise and enriching food choices, such as Labaza's signature Cava beans, considered the first coffee on earth, and our Mission and Star Chef themed food offerings. For Little Sheep and Huang Zhi Huang, our focus has been on improving their menus, refining store models and strengthening their supply chain.

Little Sheep's new conveyor belt hotpot model is designed to appeal to solo diners and younger consumers. Wang Zihua has demonstrated resilience, delivering profits for five consecutive years ever since our acquisition. For Taco Bell, in 2024, we pruned our store portfolio to focus on our key markets, Beijing and Shanghai. These efforts led to improved operating results. Let me now go through our quarter four P and L.

As a reminder, restaurant margin on a comparable basis excludes additional VAT deductions as well as temporary relief from landlords and government agencies received in the prior year. Core OP further excludes foreign exchange impact and special items. For quarter four, system sales grew 4% year over year and same store sales index sequentially improved to 99% of prior year levels. KFC system sales increased 5% year over year. Same store sales index improved sequentially reaching 99% of prior year levels with a 3% same store transaction growth year over year.

Our widened price range, reduced delivery fees and smaller ticket items like coffee and breakfast successfully attracted consumers. Quarter four ticket average was 38 yuan, 4 percent lower than prior year levels, yet stable with quarter three. Pizza Hut system sales increased 3% year over year. Same store sales index achieved 98% of prior year levels, improving by four percentage points sequentially. Same store transactions grew 9% year over year, the highest growth quarter in 2024.

The ticket average was 10% lower year over year, which is in line with our strategy to transform Pizza Hut into a more mass market brand. More importantly, Pizza Hut's profitability continued to grow. Core OP in quarter four more than tripled year over year. Our restaurant margin was 12.3%, one hundred and sixty basis points higher year over year. On comparable basis, restaurant margin was 180 basis points higher year over year.

We achieved savings across all cost lines. Cost of sales was 31.9%, fifty basis points lower year over year. Cost of sales improved through favorable commodity prices and our spending better and buying better initiatives under Project Red Eye. We continue to pass savings from these initiatives to our consumers offering excellent value for money. Cost of labor was 28.2%, eighty basis points lower year over year or 90 basis points lower on a comparable basis.

Improved operational efficiency more than offset wage increases for our frontline staff. Occupancy and other was 27.6%, thirty basis points lower year over year or 40 basis points lower on a comparable basis. This came from cost optimizations such as utility savings and simplified operations. Our OPE margin was 5.8%, one hundred and forty basis points higher year over year, driven by improved restaurant margin. Operating profit was US151 million dollars growing 35% year over year.

Core OP also increased 35% year over year. Net income was USD 115,000,000, growing 17% year over year. As a reminder, our mark to market equity investment had a negative impact of $9,000,000 in quarter four compared to a negative impact of $14,000,000 in the same period last year. We recognized $16,000,000 lower interest income this year from a lower cash balance. Diluted EPS was $0.3 growing 27% year over year or 20% excluding mark to market equity investment impact.

For the full year, system sales grew 5% and same store sales index reached 97% of prior year levels. Restaurant margin was 15.7, steady year over year on a comparable basis. G and A expenses were 5% of revenue, in line with our target and 80 basis points lower compared to 5.8% in the prior year. This was due to operational efficiency gains and lower performance based compensation in the year, among other factors. Operating profit grew 8% to $1,200,000,000 Core operating profit increased 12%.

Effective tax rate was 26.7%, in line with our guidance and prior year. Net income was $911,000,000 up 13% year over year. Diluted EPS was $2.33 or 22% year over year or 12% excluding mark to market equity investment impact. Now let's turn to capital returns to shareholders. We're on track to return $4,500,000,000 to shareholders from 2024 through 2026 with a total of $3,000,000,000 allocated for 2025 and 2026.

'6. The average annual amount is equivalent to around 9% of our market cap. In 2024, we returned $1,500,000,000 including US248 million dollars in quarterly cash dividends and $1,240,000,000 in share repurchases. Total repurchases exceeded 31,000,000 shares, representing 8% of our total shares outstanding. We generated $714,000,000 in free cash flow in 2024 and ended the year with $2,800,000,000 in net cash.

With our healthy cash position and robust cash generating capabilities, we're stepping up our quarterly dividend significantly by 50% from $0.16 to $0.24 Assuming $0.24 per quarter, our payout ratio will be equivalent to over 40% of of our diluted EPS in 2024. Additionally, our $360,000,000 of share repurchase plan for the first half of twenty twenty five has been executed daily. We're committed to providing attractive capital returns to shareholders. Finally, moving on to our 2025 outlook. We continue to maintain our dual focus on system sales and same store sales growth.

In terms of our footprint expansion, we're on track to reach 20,000 stores by 2026. In 2025, we expect to open between 1,618 net new stores. Capital expenditure in 2024 totaled US705 million dollars In 2025, we expect capital expenditure to be in the range of US700 million dollars to US800 million dollars Turning to margins. While commodity prices remain largely favorable, we continue to expect wage inflation in 2025. With our ongoing efforts in operational efficiency, we expect G and A expenses as a percentage of revenue to slightly decrease for the year.

For 2025, we expect to hold core OP margin relatively stable or even slightly improve it year over year. By brand, we're committed to maintaining healthy restaurant margins for KFC and improving Pizza Hut in the mid to long run. As consumers celebrate the Chinese New Year, we're offering them delicious food, great value and an enjoyable experience. While trading so far has met our expectations, we need to closely monitor post holiday trading. The external environment remains dynamic.

Consumers are willing to spend more during holidays, but may become more cautious afterwards. We remain hopeful that stimulus policies may positively impact consumption in the mid to long run. For quarter one, we're confident that same store transaction index will continue to be positive for the ninth consecutive quarter, and our goal is to outperform the industry. Let me pass it back to Jo Yi for her comments on CNY and our strategy.

Thank you, Adrian. Building on Adrian's observations on Chinese New Year trading, I was delighted to see our stores bustling with customers. We offer them great food at an incredible value and exciting campaigns featuring Olympic champion and popular IPs. At KFC, we brought crayfish back for the eighth consecutive year. We even combined it with our iconic beef rep, to create a new customer favorite.

Our Chinese New Year tradition is the golden bucket. This year, for the first time, it included a whole chicken, making it a great choice for sharing with family and friends. At Pizza Hut, we introduced festive tray up options for our pizzas, such as pistachio stuffed crust and fortune cat crust, sau cai mau bingdi, a crust in the shape of fortune cat. In China, the pistachio symbolizes happiness and the fortune cat represents luck and prosperity. Customers love these good wishes for starting the new year.

As I reflect on our industry leading results over the past few years, I come back to our due focus on operational efficiency and innovation. I think it's fair to say that most view these two as trade offs. To get one, you must compromise on the other. At Yum China, we reject that as a fourth trade off. We need both and both is the only outcome we will accept.

Operational efficiency has been a hallmark of Yum China from the beginning, but we have dialed up our efforts significantly in the last couple of years. Our Project Fresh Eye and Red Eye initiatives have given us new perspectives on our operations and transformed our organization. They have made us more efficient, agile and competitive from our restaurants and shared service centers to our supply chain. At the same time, we have doubled down on digitization, leveraging technology and generated AI to enhance customer experience and efficiency. The gains we have realized from these initiatives are not merely incremental.

They represent structural improvements in our business capabilities that set us up for profitable growth far into the future. Innovation colors everything we do in every aspect of our business. We introduced around 600 new or upgrade menu items in 2024. Exciting new food and excellent value for money drive traffic to our stores. We innovated new store models such as KFC Small Town Mini and Pizza Hut valve to tap into underserved customer segments.

We have found that operational efficiency and innovation fit all and reinforce one another. We have employed innovation to attack the problem of operational complexity. At KFC, our menu innovation focuses on infusing fresh energy into our flagship categories to unleash their huge potential. Our regional recipe chicken burger, gigantic egg tart, and crispy whole chicken, generated a lot of excitement. At the same time, we are simplifying operations to support these menu innovations.

The same strategy applies to Pizza Hut. In December, we launched a brand new menu with delicious new products while streamlining operations. For example, the Golden Salty Egg Chicken Pizza, Liuzhindanhua Nengzi Pizza, crafted with our existing ingredients instantly became a popular choice. We also lowered prices on several of our iconic products while protecting margins. Our value for money communication is now more straightforward and compelling.

Customers love our new menu. And in quarter four, Pizza Hut achieved the best same store transaction growth in 2024. Before we turn to Q and A, I would like just to recap the three key takeaways from today. First, we achieved record breaking results in 2024 from top line to bottom line. KFC remains our key growth engine and profit contributor.

Pizza Hut has made significant progress, transforming in every aspect and feels to me as though it has reached an inflection point. Second, our due focus on operational efficiency and continuous innovation has made our business more resilient and competitive, positioning us for long term sustainable growth. Lastly, we remain committed to both sustainable growth and capital returns to shareholders. We are on track to return $4,500,000,000 to shareholders from 2024 through 2026. The average annual amount represents around 9% of our market cap.

This quarter, we are stepping up dividends by 50. With that, I will pass it back to Florence.

Thanks, Joey. Now we will open the call for questions. In order to give more people the chance to ask questions, please limit your questions to one at a time.

We are now going to proceed with our first question. The questions come from the line of Michelle Chang from Goldman Sachs. Please ask your question.

Hi, Joey, Adrian. Congrats again for the very solid results. And we understand the consumption environment still quite fluid. So I would like to take a chance to hear your observation on the competitive landscape. So we indeed hear some companies who are slowing down expansion and even they are starting to withdraw some of the promotion activities.

And we noticed that KFC actually start to raise the price early of the year. So are we seeing the competitive landscape improving? And also we see more opportunities to further accelerate, penetrate, expand in our market share. So it will be great to hear your insight. Thank you.

Thank you, Michelle. We do see some rationalization of marketing promotion and also a little bit of price increase, including ourselves. So I think that is healthy because very modest price increase and the rationalization of the promotion, they do help to manage the cost pressure. So that is sort of the overall what we are observing. However, most importantly, I think for us, we know what's our focus and maybe I'll take this time to just really highlight the few things that Adrian and I would both make in our opening remarks earlier.

Obviously, our hardware in Pizza Hut for a change, let me start with Pizza Hut. We We have done something right because we actually used the word inflection point for this quarter because we really have seen every aspect of the business has been transformed in a very positive way. The results speak for itself, very nice improvement of the same store sales, 4%. And then the OP improvement is solid. And then the net new store opening is four twelve this year, twenty twenty four.

It's the best net new store in the last ten years really. And still, the breakeven is two to three years. And the breakthrough of the two business of the business model, one is just to become even more mass market, which is having our goal in the last many years with the introduction of additional product and lowering the price. And then the second breakthrough is the valve. So very nice result with very clear growth drivers.

So we are at the inflection point for Pizza Hut. For KFC, it's a very big business already, but yet we still see quarter four and ongoing strong momentum and performance in three way. One is we continue to widen the offering in terms of price point, increasing the entry price point, but also higher ticket average such as whole chicken. And then also the secondly is the K Coffee improvement. It's 30% growth for K Coffee alone.

And that's very, very nice. And then the delivery too, delivery is not only one quarter, it's ten years of double digit increase. And net net for both business, just to do another health check, the same store transaction growth is nice and healthy on the eighth quarter of such. So with all these happening, we are capturing incremental business and hopefully a little bit of market share. But with that said, Michel, it's still a very big market.

And our market share, relatively speaking, is still very small, even though we are the biggest player in the market. And there's still a lot of the opportunity for us to expand the business, have more market share by going to lower Tier three and going for the incremental franchisee store etcetera, etcetera. But I'll pause here. Thank you, Michelle.

Thank you, Joey for the explanation and congrats again.

We are now going to proceed with our next question. The question has come from the line of Chen Lau from Bank of America. Please ask the question.

Hi, Julian, Adrian. Congrats again on the results. So my question is focused on the new store expansion. Because I noticed that, A, we have opened more and more smaller stores and B, we

expanding to more and more to the lower tier cities. And number three, we are now shifting from an equity store focused model to a hybrid model with more and more franchise stores to be opened in next few years. What's the implication from these changes? For example, if you look at the second half numbers of last year, so our net store opening growth was around low teens. But then if you look at the revenue contribution from new stores, it should be around 5% for Q4 and about 6% for second half.

And meanwhile, our franchise stores as a percentage of total net new stores increased to about 33% versus only teens in first half. So with all these things in mind, is it fair to say that the near term algo in terms of the revenue contribution from new store openings in the coming few quarters could be just around 5% or 6%, similar to second half of last year due to the in case some smaller stores and more and more expansion into the lower tier cities as well as the franchise stores. Hope my answer is my question is clear enough. Thank you.

Thank you, Lawson. I'll address your question of the new store and franchisee store and then Asian public can help elaborate a bit in terms of relationship of the store number versus the revenue contribution. So I mean, Lawson, we are pursuing due focus on both returning a lot of capital to the shareholder and at the same time pursuing high growth. So we have addressed the capital allocation already in our opening remarks. So on the new store opening area, you can see that we just continue to be very aggressive with that because as I answered my question to Michelle earlier, there's still a lot of opportunity for us to open store, both in a top tier city and lower tier city.

And the strategy needs to be slightly different, but we see that opportunity. And then the lower tier city right now is a big focus because even we observe the trading in the last year or even last quarter, lower tier cities still doing better. So we'll continue to do that. But it does require different model, for example, lower investment, smaller menu, simpler operation. But net net, the criteria is we still want to two years payback for the stores across all city tier and for KFC and two to three years for Pizza Hut.

As far as we can achieve that, we'll continue our journey to open more store in top tier city and lower tier city. When it comes to the relationship between company owned store and franchisee store, our despite our accelerated franchisee store opening in the last year and particularly last quarter, the company owned store still contribute to vast majority actually specifically 85% of our entire portfolio. So it's going to take a while for the franchise store to catch up even though we are catching up. So for the company owned store, it does have very nice store economics. However, why we are accelerating the franchising store because they are incremental.

They're incremental in two area. One is strategic location such as highway service center, college campus, hospitals, etcetera, etcetera. And secondly, they are in the lower tier city and remote area as well. So both are incremental. And operationally, we can do it.

Our team can do it. Operationally, we have the appropriate store model such as KFC Small Town Mini for KFC. And then right now, the Pizza Hut valve is very promising for the lowest Tier City as well. So therefore, we are doing more. So it's a natural development of our company's capabilities.

And then I'll pause here. I'll let Adrian answer the relationship between the revenue and the store.

Thank you. Thank you, Joey. So Lotren, you are exactly right that the size of the stores become smaller and smaller. And it's worth noting that even for the larger stores, in the first year of their opening, the revenue tend to be smaller. Overall, our new store that opened this year enjoyed 50% to 60% of revenue compared to the mature stores.

So that's the first point. The second point is the store week also play a role here. So if keeping all else equal, then yet net new store growth rate the same, the time at which we open the stores within a quarter will play a role in the system sales growth. So that I think at least two points combined will address your question on the mathematical relationship there. And lastly, I think you asked the question over the next few quarters, what is our system sales growth guidance?

I think if overall macro situation is stable as it is right now, we would, as you pointed out, enjoy a mid single digit growth of system sales this year in 2025. Obviously, new store only play a portion of the role here. It's important to know that SSG is also important in deciding what is the ultimate system sales growth. So these two combined will contribute to the final figure of system sales growth. But at this point in time, we do expect a missing low digit growth for this year 2025.

Thank you. That's very clear. Congrats again and also happy twenty

We are now going to proceed with our next question. The question comes from the line of An Lin from Jefferies. Please ask your question.

Hello. Thank you very much for taking my question. Just one question regarding the TA. So I understand that the same store sales growth, the decline actually narrowed. Then like if we take a look at the breakdown, TA is still negative, but however, we have a very strong TC to offset this.

So my question is like when do you think that this TA will start to turn positive or yes, so I think that's the key question that I have especially for KFC. Thanks.

Thank you. Thank you, Anne. So our TA trend is basically consistent with our intended strategy to drive traffic. And as you point out, we continue to drive same store transaction growth. It's the eighth consecutive quarter, and that allow us to grow our business in underserved market segment, which is working.

And at the same time, it's important to note that while we are doing that, we are able, at the same time, protect the margin as it show in the quarter four margin. Restaurant margin and OP margin both actually improved because our TA strategy is also aligned with our due focus on operational efficiency and innovation. And then answering your question about our plan going forward, well, in the long term longer term, we took a balanced approach to maintain a steady TA. For example, our quarter four TA, which is KFC would be RMB38 is still higher than the TA pre pandemic. In the short term, our goal of the TA is to remain relatively stable.

Our quarter four TA, 38 yen, again, is stable versus quarter three. And our focus is on value and then also widening the price range and also to drive the traffic. And it's working. And we don't have any material plan to change our approach even after the modest price increase back to December 2024. And for Pizza Hut, our strategy is to continue to drive the TA down to make it more mass market while improving the sales and the profit.

We are now going to proceed with our next question. The question has come from the line of Lillian Liu from Morgan Stanley. Please ask your question.

Thanks a lot. Hi, Joey and Adrian. Congrats again. My question is more on margin. Obviously, I think the fourth quarter is another evidence of a very strong execution efficiency and all around the operation management.

And in particular, I think the payroll and the labor cost savings was quite significant. So trying to understand going forward in 2025 with all the cost projects initiatives continuing, what are line items in particular are we seeing more chance for savings further? And what kind of overall margin improvement trend we can expect for 2025? Thanks.

Thank you, Lillian. So let me try to address this question. Firstly, sales is an important factor to determine the margin for 2025. And I'll actually first state the conclusion first on the overall margin trend and then break it down for the different drivers. As to the conclusion, as I mentioned in the prepared remarks, we look to keep the core key margin for the full year relatively stable or even slightly improve it year over year.

And by brand, we're committed to maintaining a healthy restaurant margin for KFC and improving Pizza Hut's restaurant margin in the mid to long run. And then now I'll break it down into different drivers. Firstly, I'll discuss about COS. So we continue to invest in value for money to drive incremental traffic. And commodity price remain favorable as I mentioned in the prepared remarks in the near term.

And we continue to see improvement through Project Red Eye initiatives, redesigning our product approach to optimize ingredient use. Because of our long term guidance, we still aim to keep our QoS at 31% plus and minus 1%, but for the year of 2025, this ratio is likely to fall in the upper half of our guidance range, with some slight improvement year over year from 2024. So COS as a percent of sales will slightly improve year over year, but it will fall in the upper half of our guidance range. So that's our COS. In terms of COL, we will face some headwinds.

So we are facing ongoing cost pressure from wage inflation, which over the years tend to be low single digit or two mid single digit. And they will increase in our rider cost is also a challenge because the delivery mix will increase. But to clarify, the rider cost per ticket will go down as we previously discussed about, but the increase in delivery mix will make the rider cost as a percentage of our sales increase. We'll continue to make every effort to drive operational efficiency to partially offset those cost pressure on CLL, but overall, we do expect to face some headwind on CLL as a percentage of sales. And then thirdly, coming to O and O.

We do see much improvement from O and O from the past few years if you compare it to 2024 from 2019 before the COVID times. There was a significant improvement in rental. Back then, the rental was around 10% of sales. Now, as you know, it's below 9%, although we don't disclose the exact figure. Depreciation also meaningfully improved as a result of capital expenditure improvement.

And also, we seek a higher return on investment on advertising expenses. So advertising A and P expense have been improving over the past five years. And then speaking of 2025, we will continue to look for opportunities to generate some savings in O and O, but the O and O cost as a percent of revenue is likely to be stable year over year from 2024 to 2025. The opportunities that I mentioned include the AMP opportunities, particularly for Pizza Hut because the AMP as per percent of sales for Pizza Hut is still slightly higher than KFC. So we do see some opportunities there.

But for other some other line items within O and O, we also feel some pressure. So overall, while occupancy other costs, it's likely to be stable. And lastly, coming to G and A. As I mentioned in the prepared remarks, we target the two year P and A stand up presenter sales to slightly decrease, but we do expect some quarterly fluctuations. So that helps give you some more color on our margin.

And in a nutshell, the conclusion is the quality

margin will remain relatively stable or slightly

Ask one short comment regarding the cost of labor. In terms of approach, specifically what exactly have we been doing, mainly focusing on few things, simplification, automation, centralization, digitization. So all these activities in the stores are going through these few approach to improve the efficiency of CLL. So exactly what are we doing? Well, for example, Generate AI, we've been using Generate AI to screen millions of resume and then also forecasting etcetera.

Yum China Holdings (YUMC) Q4 2024 Earnings Call Transcript

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