Yum China posts strong earnings, announces new CEO

CHINA – U.S. stock market indexes closed moslty lower on Friday, reversing the positive trend of the past week. The Nasdaq Composite reached another new high, but the Dow Jones and S&P 500 were slightly lower.

Despite this downturn, shares of Yum China Holdings Inc. gained more than 2.5% on the back of yesterday’s announcement of its first dividend and an increased stock buyback plan.

Further, a new CEO was announced.

The first quarterly dividend is 10 cents per share, and the stock repurchase authorization has increased to $550 million from $300 million.

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Joey Wat, the company’s president and chief operating officer, will succeed Micky Pant as CEO in March 2018.

After joining the company in 2014, Pant has been the CEO and a board member since its spinoff from Yum Brands Inc. and was previously CEO of Yum Restaurants China.

On Oct. 5, the company reported its financial results for the third quarter. Yum posted EPS of 52 cents and revenue of $2.04 billion, beating revenue estimates by $60 million, but coming up short of EPS expectations by four cents.

Same-store sales grew 6%, with a 7% increase at KFC but with no increase at Pizza Hut. Total system sales grew 10%, including 11% growth at KFC and 7% growth at Pizza Hut.

The total restaurant margin inched up 0.8 percentage points to 20%, driven by same-store sales leverage. Moreover, the operating profit increased 11% due to same-store sales growth.

“In this quarter, our strategic initiatives on digital and delivery continued to show encouraging development, which we believe will enable our long-term growth,” Pant said.

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“The connection with our over 120 million loyalty members is getting stronger. The growth in mobile payments and cashless settlement methods for sales continued to outperform previous quarters.

With over 5,100 restaurants across China offering delivery service, delivery contributed over 14% of company sales in the third quarter.”

The stock is up more than 50% year to date.

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