Yum China Holdings Inc. (YUMC) saw its shares drop by more than 5% in after-hours trading on Tuesday, following the release of its third-quarter earnings report. As the parent company of fast-food brands such as Pizza Hut and KFC in China, Yum China stated that it had experienced a slight decline in consumer demand recently.
Earnings Overview
For the third quarter, Yum China reported a net income of $244 million, or 58 cents per share. This is an increase from the $206 million, or 49 cents per share, that was earned during the same period last year. Adjusted for one-time items, the company’s earnings per share came in at 59 cents. Furthermore, Yum China’s revenue rose by 9% to reach $2.91 billion, compared to $2.68 billion from a year ago.
Same-Store Sales
According to the company, its same-store sales increased by 4% year over year. Additionally, both KFC and Pizza Hut saw positive growth, with sales increasing by 4% and 2%, respectively.
Analyst Expectations
Despite solid results, Yum China fell short of Wall Street expectations. Analysts surveyed by FactSet had predicted adjusted earnings of 65 cents per share on sales of $3.12 billion for the third quarter.
Outlook for Q4
Chief Financial Officer Andy Yeung emphasized that the company achieved “robust results despite macroeconomic headwinds.” However, he noted that consumer demand had softened in late September through October. Yeung also mentioned that the fourth quarter typically has lower sales and profits, making small fluctuations in sales more impactful on margins.
Overall, while Yum China’s third-quarter earnings showed growth and positive performance, the recent decline in consumer demand raises concerns for the upcoming quarter.
