Restaurant closures and volatile consumer behaviour dent Yum China’s sentiments

Shanghai-based fast-food restaurant company Yum China’s sentiments declined due to closures and low foot traffic, yet digital sales, deliveries and takeaways remain healthy prospects.

This according to leading data and analytics company, GlobalData.

Decrease in operating hours

According to GlobalData’s Filing Analytics Platform, Yum China’s earnings transcript sentiment score fell by 7% in the first quarter (Q1) of 2020 ended 31 March compared to the fourth (Q4) quarter of 2019. While the sentiment scores for Starbucks and McDonald’s declined 21% and 34%, respectively during the same period.

Sentiments slumped due to a 14% decline in Q1 2020 revenue compared to Q4 2019. COVID-19 forced Yum China to close down stores in late January 2020, and by February 2020, the company shut around 30% of all stores. For open restaurants, a decrease in operating hours caused slumps in same-store sales while consumer behaviour was influenced by social distancing and subsequently impacted the foot traffic. Sales deleveraging in the KFC and Pizza Hut segments also eroded the company’s margins. 

Rinaldo Pereira, senior analyst at GlobalData, says: “Unlike its counterparts, Yum China’s sentimental drop was not severe as it quickly shifted its focus to contactless takeaways and home deliveries. The company also drove innovation across its restaurant menus to increase customer traction.”

Online sales

During Q1 2020, deliveries contributed to around 35% of the company’s sales, and despite the pandemic, the segment witnessed 16% growth. Yum China experienced a shift towards online sales due to its innovative menus. In Q1 2020, 84% of KFC’s sales were digital, while it was 65% for Pizza Hut.

Image
Yum China Holdings sentiment scores

However, increasing rider costs, sales deleveraging and commodity inflation offset segmental margin growth. Yet, the company was able to keep up the overall profits due to a US$50m reduction in rental expenses.

According to Yum China, foot traffic and customer behaviour started stabilising in April 2020. However, it had not reached pre-lockdown levels. The lingering social distancing and travel declines are hampering weekend sales. Pizza Hut was the worst hit due to its casual dining style, although the pandemic helped the food chain to focus on deliveries and digital sales. Pizza Hut also faced excess inventory challenges during the quarter due to store closures. The company used excess inventories for creating newer items for takeaway orders.

Pereira concludes: “Despite the contagion causing cash constraints for several companies, Yum China completed the acquisition of Huang Ji Huang and KFC Suzhou.  The company is focusing on strategic investments to help it weather the future business impacts of COVID-19. Yum China’s management expects to boost the takeaway business to help offset dine-in and delivery challenges.”



Latest


07 Jul 2020
Convenience eating redefined by COVID-19 lockdown

The notion of convenience will take on new meaning at mealtimes as cocooning consumers re-evaluate their priorities

Convenience eating redefined by COVID-19 lockdown

The notion of convenience will take on new meaning at mealtimes as cocooning consumers re-evaluate their priorities

06 Jul 2020
Burger King Finland pranks competitor with free delivery campaign

Burger King Finland placed outdoor ads outside its competitor's restaurants, promising free delivery if you set your pickup location to…

Burger King Finland pranks competitor with free delivery campaign

Burger King Finland placed outdoor ads outside its competitor's restaurants, promising free delivery if you set your pickup location to a McDonald’s restaurant

11 Jun 2020
Langplaas partners with RSA Group

RSA Group has welcomed Langplaas to its family of producers

Langplaas partners with RSA Group

RSA Group has welcomed Langplaas to its family of producers

11 Jun 2020
Merchant Capital throws restaurants a lifeline during lockdown

Alternative lender Merchant Capital has launched an innovative short-term finance product to give restaurants a much-needed injection of working capital…

Merchant Capital throws restaurants a lifeline during lockdown

Alternative lender Merchant Capital has launched an innovative short-term finance product to give restaurants a much-needed injection of working capital to help ease the economic impact of the national lockdown regulations.


Top stories


23 Apr 2020
Greenall’s latest Original Dry Gin variant is here to take your blues away

As the world adjusts to a more homebound lifestyle, the launch of Greenall’s Blueberry variant in South Africa in July…

Greenall’s latest Original Dry Gin variant is here to take your blues away

As the world adjusts to a more homebound lifestyle, the launch of Greenall’s Blueberry variant in South Africa in July 2020 will make you want to kick back and relax at home. Greenall’s Original London Dry Gin has been infused with natural sweet blueberries – popular the world over having…

22 Apr 2020
Thomas Dakin London Dry Gin arrives on SA shores

Thomas Dakin Small-Batch Gin, a classic style juniper-focused gin, known for its proud heritage and impressive craftmanship, is finally available…

Thomas Dakin London Dry Gin arrives on SA shores

Thomas Dakin Small-Batch Gin, a classic style juniper-focused gin, known for its proud heritage and impressive craftmanship, is finally available in South Africa

20 Apr 2020
‘We will come out of this stronger’ – A restaurateur’s experience of COVID-19

By: Larry Hodes, owner of Calexico On Monday 16 March; when the rumours of COVID-19 began getting more serious; there…

‘We will come out of this stronger’ – A restaurateur’s experience of COVID-19

By: Larry Hodes, owner of Calexico On Monday 16 March; when the rumours of COVID-19 began getting more serious; there was an immediate drop off in customers in my three restaurants. In the next 10 days my turnover would decrease by between 80 to 100% in my restaurants. When the…

18 Jun 2018
Popular Sandton restaurant, The Bull Run, gets a facelift

The popular Johannesburg restaurant The Bull Run is getting a full refurbishment to continue to serve its loyal customers for…

Popular Sandton restaurant, The Bull Run, gets a facelift

The popular Johannesburg restaurant The Bull Run is getting a full refurbishment to continue to serve its loyal customers for many more years to come. The restaurant first opened in October 2000. The concept was to launch an upmarket grill room for local and international guests of the hotel, including…


Visit the official COVID-19 government website to stay informed: sacoronavirus.co.za