Yahoo Finance

Adrian Ding

Thank you, Joey. Let me start with KFC. In the first quarter, KFC deliver solid sales and profit growth. We added 295 net new stores, bringing our total to 11,943 stores, new to a payback remain healthy at two years.
System sales increased 3% year over year. Same-store sales index amounts to 100%, no prior year level for the first time since the first quarter of 2024, fueled by same-store transaction growth of 4%. We observe strong growth in smaller orders from them by wider price ranges or delivery fees and rapid growth in coffee.
The ticket average for quarter one was RMB40, lower than the prior year period, similar to the trend in the second half of 2024. There may still be some short-term fluctuations. Our expected [CEA] to be relatively stable over the long run.
Despite a lower [TA], restaurant margin improved by 50 basis points year-over-year to 19.8%. Operating profit grew 5% year over year to $386 million. We innovated by adding first twist to our classic menu items to excite customers and fulfill their changing needs.
KFC Lontra Spicy Flavor of Original Recipe Chicken, for the first time since we entered China in 1987, the classic base pairs well with of exotic spicy flavor. Sales mix of original recipe chicken increased 50% during the promotion period.
We also introduced a Spicy Original Recipe Chicken Burger, which of course, comes with mashed potatoes. These innovative new products resonate well with our consumers, much was originally a nationwide, attracting new topic.
Serving bucket has been a Chinese new year tradition for KFC. This year, we enhanced the golden bucket by including our popular whole chicken, making it even more ideal for sharing. To address the trend of smaller gatherings, we also offered a variety of smaller buckets. Total sales of our Chinese New Year buckets grew over 50% year over year.
Let's now move on to Pizza Hut. For four consecutive quarters, Pizza Hut has achieved significant progress, marked by sequential improvement in the same-store sales index on a year-over-year margin expansion. Operating profit also grew 29% year over year in quarter one.
In quarter one, system sales increased 2% year over year. Same-store sales index of about 1% to 100% of prior-year level, also for the first time since the first quarter since the first quarter of 2024, of two percentage points versus quarter four last year.
Same-store transactions grew substantially by 17% year over year, driven by rapid, deliberate growth, increased popularity of pizzas below RMB51, and the successful launch of our new menu. The ticket average was RMB78, 14% lower year over year, consistent with our strategy and driven mainly by better value for money offer by our new menu.
Again, despite the lower TA, restaurant margins improved 190 basis points year over year. Our new menu allow for simpler preparation at our stores. We're also automating key kitchen processes.
Additionally, Pizza Hut has all-you-can-eat campaign that took place in quarter one last year, was shifted to quarter two this year, and this, accounted for nearly half of the year-over-year margin improvements. Pizza Hut has expanded to 3,769 stores with a net addition of 45 stores in quarter one. This number is lower than last year due to the timing of store openings and closures.
For the full year, we expect double digit percent menu store growth for Pizza Hut. The payback period for new stores remains healthy at two to three years.
Pizza Hut has made tremendous efforts to improve its menu and widen its addressable market. The new menu launch in December 2024, altered Pizza Hut's value-for-money perception and significantly boosted consumer traffic.
In March, we further upgraded the menu with new products such as expanded selection of Pizza Dough Burgers and more one person new options. For a limited time, consumers enjoy our Super Supreme Pizza at just RMB39, half the regular price.
Consumers love our flagship Super Supreme flavor. So we candidate from a pizza platform to other platforms such as burger, pasta, and rice.
Let me now go through our quarter one P&L. For the quarter one, system sales grew 2% year over year and same store sales index was 100% of prior year level. System sales growth was moderated this quarter for three reasons.
First, from '25, has one fewer business day as '21 impact. Second, we have slightly more temporary closures during the Chinese ['24] was a leap year, a 1% [inc] in new year's holiday this year compared with the prior year. We carefully evaluated holiday traffic patterns in [various], adjusted our store operations. This enabled us to serve our consumers' needs better and more efficiently.
In quarter one, net new units contributed 4% to sales growth. We're opening more smaller stores and expanding into lower tier cities. Also, we strategically close more stores to enhance the strength of our store portfolio for better overall performance. This led to lower sales growth in quarter one, which will normalize as the year progresses.
Our restaurant margin was 18.6%, 100 basis points higher year over year. Savings in cost of sales and occupancy and other costs offset increases in cost of labor. Cost of sales was 31.2%, 90 basis points lower year over year.
Cost of sales improved through favorable commodity prices and continued benefits from Project Red Eye. We continue to pass the savings from these initiatives to our consumers, offering excellent value for money. The timing shift of people have all UK campaign also positively impacted quarter one cost of sales.
Cost of labor was 25.7%, 30 basis points higher year-over-year due to higher labor costs as percentage of sales. While cost per delivery order lowered, increased deliver volume led to higher overall rider costs.
Now, rider cost as percent of sales, remained stable year over year. Simplified operations, hub of the low single digit wage inflation for our frontline staff, occupancy, and other was 24.5%, 40 basis points lower year over year.
As a result of the cost optimizations in a number of areas, notably utilities and simplified operations, G&A expenses 4.6% of revenue and 10 basis points lower compared to 4.7% in the prior year. Closure and impairment expenses increased year over year due to our strategic store optimization.
Our OP margin was 13.4%, 80 basis points higher year over year, mainly driven by improved restaurant margin. Operating profit was $399 million, growing 8% year over year. Core OP also grew 8% year over year. Effective tax rate was 27.8%, 90 basis points higher year over year. Net income was $292 million, growing 3% year over year.
As a reminder, we recognized $12 million less interest income this year due to a lower cash balance as a result of the cash used for shareholder returns.
Our mark to market equity investment also had a positive impact of $2 million in quarter one compared to a positive impact of $6 million in quarter one last year. Diluted EPS was $0.77, growing 10% year over year or 12%, excluding the mark-to-market equity investment impact.
Let's now move on to capital return to shareholders. We're on track to return $3 billion to shareholders in 2025 through 2026. This is on top of the $1.5 billion cash we returned in 2024. The average annual amount of capital return over the three years is around 8% to 9% of our current market cap.
In quarter one, we returned $262 million with $172 million in share repurchases and $90 million in quarterly cash dividends. Our cash position remains healthy. We ended the quarter with $2.8 billion in the cash.
Finally, moving on to our 2025 outlook. We're operating in a complex and evolving landscape. Consumer spending remains rational. Our strategy is to offer innovative food and great value to drive traffic to our stores.
We're working hard to achieve 10 consecutive quarters of positive same-store transaction growth in Q2. That said, we remain cautious of our potential fluctuations in same store sales index, even with many moving parts.
We reiterate our 2025 full year guidance of mid-single digits system sales growth. We expect to ramp up next store openings as the year progresses. For the full year, we're on track to open 1,600 to 1,800 net new stores.
In quarter one, we opened 247 menu stores with franchise towards accounting for 41% of KFC net new opens and 33% for Pizza Huts. Franchise menus to a mix for the 2025 full year is expected to be lower, mid to long term, our outlook is unchanged.
We expect the franchise net new store mix to reach 40% to 50% for KFC and 20% to 30% for Pizza Hut over the next few years. We also target to maintain or slightly improve quality margins for the full year. On the cost of sales front, we anticipate modest year-over-year improvements compared to 2024 remaining between 31% and 32%.
We expect no material impact from tariffs as over 90% of our procurement is sourced locally. The direct impact from U.S. imports on our cost is expected to be minimal. Additionally, we have evaluated the indirect impact of tariffs are upstream suppliers. Alternative raw materials solutions are available on our supply chain. So we are protected at the moment, but we will monitor the situation closely.
Moving on to cost of labor, we continue to face pressure on the total rider costs driven by rapid delivery growth. Our goal for non-rider cost is to keep them stable by offsetting the wage inflation of our frontline staff through more automation, simplification, and centralization.
In terms of occupancy and other, as a percent of sales, these are likely to stay relatively stable year over year. We continue to explore optimization opportunities to offset cost increases by brand. We expect restaurant margin at KFC to be healthy and stable year over year and Pizza Hut margin to improve in the mid to long run.
Lastly, we expect G&A expenses as a percentage of revenue to slightly decrease and the effective tax rate to be in the high 20s. In terms of quarterly phasing, we expect tougher year-over-year margin comparisons later in the year.
More meaningful benefit started to trickle in from Project Fresh Eye in Q2 of 2024 and from Project Red Eye in the second half of 2024. Overall, we're working hard towards our full-year targets.
Let me pass it back to Joey for her closing remarks.

Joey Wat

Thank you, Adrian. Now let me spend some time on that strategy. Like everyone else, we are navigating choppy waters, but we have an excellent team capable of turning challenges into opportunities.
We will stay alert and concentrate on what we can manage. Our customers continue to love our brands, our delicious, innovative food and our very affordable prices, our wide and price ranges, field healthy transaction growth. We also offer a bundled and emotion of value to customers.
The 85th anniversary of KFC's Original Recipe Chicken (foreign language) brought that childhood memories for our customers.
Pizza Hut celebrate Chinese New Year by wishing them good fortune with the fortune kit crust pizza (foreign language). We also collaborate with top [IPs] to over member exclusive deals through our own online and offline channels.
A notable example was our campaign with a public Chinese mobile games Identity V (foreign language), and we include tangible and virtual accessories with our meals successfully engaging many young customers.
Besides our amazing fluid-end value, we offer exceptional convenience with over 16,000 stores in 2,300 cities across China. We are rapidly expanding our store portfolio and deepening our reach. Our innovative and flexible store models help us to profitably expand our addressable market and capture additional funding opportunities.
At KFC, KCOFFEE sustained strong growth in quarter one with both cups and sales up around 20% year over year, we see huge growth potential by leveraging KFC's customers and membership base. In particular, a large majority of our vendors have yet to try KCOFFEE.
By utilizing KFC footprint, KCOFFEE is expanding rapidly in this high-potential market. The incremental investment is like both equipment and resources can be shared with 1,000 KCOFFEE cafes now.
We're aiming for 1,500 locations by end of 2025, which is 200 more than our original target. On the menu side, in addition to our signature Sparkling Americano (foreign language), we introduced premium Geisha beans (foreign language) for coffee lovers at just RMB12.9.
We also launched a matcha (moata) lineup for tea drinkers, boosting afternoon sales. Having coffee in the morning and tea in afternoon is a great way to stay energized.
At Pizza Hut, WOW is a simpler and more efficient model. Compared to the regular Pizza Hut, WOW per person spending is lower. It's simpler menu, entry price point products, and shop value for money appeal to young people and solo diners.
As we fine tune the model, restaurant margin has expanded year over year, building on the successful conversion of some Pizza Hut stores to the WOW model. We have started opening new WOW stores. At brand new WOW stores, CapEx can be as low as half of a regular Pizza Hut store .
We've reduced CapEx, lower for person's spending and simplified operations while seems suitable for lower tier cities, thereby expanding Pizza Hut addressable market.
Turning to our dual focus on operational efficiency and innovation, our approach is to rethink our operations from fresh perspectives. Over the past two years, we launched Project Fresh Eye and Project Red Eye. These initiatives will continue to benefit us far into the future.
We have streamlined our menu, simplified foot preparation, centralized certain processes, and deployed more automation. Our innovative approach enable us to maintain consistent standards for quality and service.
Technology and innovation play a crucial role in boosting efficiency. Our end-to-end digitization covered key operational processes from customer service and quality control to staffing and inventory management.
There are numerous examples. Just to name a few, will leverage AI to analyze customer feedback from various platforms.
This means we can swiftly adjust our operations after a new product launch, often within just a day or two. In a digital customer service center, generated AI helps customers resolve around 90% of issues before they reach our team. We are also exploring the use of robotics to further advance our operational capabilities. Before we turn to Q&A, I would like just to recap the three key takeaways from today.
First, KFC continues to be a resilient post-trade, performing well through both good times and bad. Pizza Hut has maintained its positive momentum, following last year's inflection point.
Second, we are broadening our addressable market with expanded menus, widens the price ranges, and innovative models. These include our KCOFFEE cafe as well as KFC's small-town mini and Pizza Hut WOW models.
Lastly, we remain committed to our new focused strategy of enhancing operational efficiency and fostering innovation to capture the amazing opportunities in China and create long-term value for our shareholders.
With that, I will pass it back to Florence.

Question and Answer Session

Florence Lip

Thanks, Joey. Now we will open the call for questions. In order to get more people a chance to ask questions, please limit your questions to one at a time. Operator, please start the Q&A.

Operator

(Operator Instructions)
Lillian Lou, Morgan Stanley.

Lillian Lou

Can you hear me? This is Lillian. Thanks, Joey, Adrian and Florence. My question is more on via the competition and the demand trends on -- after first Q, we've been seeing a better general consumption slowdown post Chinese New Year. So I just want to understand any kind of annual update of our business trend.
And in particular since April, we all know that JD started to push on delivery with big subsidies and a lot of our competitors and a local players are drowning. So any impact to our business, so far and our strategy to this for the aggregate our competition if such competition gonna last for the longer run. Thank you.

Joey Wat

Thank you, Lillian. So far, our April performance is in line with our expectations. And we have not observed any significant negative impact we have to watch for. Let me comment what -- but yeah, we continue on the consumer trends and then touch on the JD question.
We -- as I mentioned, we really have not observed any significant negative intel on our business, but of course, a situation remains fluid. We'll continue to be alert and monitor the trends with multiple scenarios, monthly planning.
So with all these macro sort of a challenging environment, I just want to point out that we have successfully navigate a wide range of market conditions in the last 30 some years. Even in the last few quarters, we have faced challenging market conditions for some time, but we have consistently demonstrated our ability to thrive in both good times and bad times.
I would like to make three points about the consumer sentiment, point why we are in China and dedicated to serving the Chinese people and both KFC and Pizza Hut are well-recognized brands. They're loved by Chinese consumer. We serve over 2 billion customers annually.
We have earned very strong customer support and established the connection with them. And in general, Chinese consumers have become more rational, sophisticated, and very dramatic.
Point 2 is we are also well recognized for supporting millions of jobs in China and giving back to the community. You know, some examples, like 18 years of one-year donation and then put them in over a thousand so, et cetera, et cetera.
So is all suppliers and franchisees and business partners are very supportive for, so we have good momentum. In terms of competition with -- in terms of the question is regarding the JD, I would like to make two points [lead in].
One is we are open to work with all platforms. Our goal is always to serve customers where they are and attract new customers. With that said, we do things at our own pace and we always balance short-term and long-term considerations.
Second point is even as we expand our aggregator platform and by the way, we have continued to grow our delivery business for 11 years. And we just deliver another double-digit or 13% increase in delivery business.
We continue to maintain strong control of our business, over 70% of our sales outside the delivery aggregators. So the 70% business include [dying] takeaway and our own -- very own delivery channels.
Our own App exclusive perfs further drive customers. So that's where we are and I think as of yesterday or today, there's another company stepping up the delivery and competition, so will remain a watchful and then we'll balance our strategy in the short term and long term.

Operator

Michelle Cheng, Goldman Sachs.

Michelle Cheng

Hi Joey, Adrian, and Florence, thanks for taking my question. My question is regarding Pizza Hut=. The first quarter Pizza Hut same-store sales of their margins were really impressive, better we know that. Actually, first quarter last year, the same-store sales base was high, given all-you-can-eat content.
So can you share with us how do you think about the same-store sales trajectory in [wrap] of the year? In the second quarter, we know we launched all-you-can-eat campaign again. So on top of that, we have easier base, supporting for our second quarter last year. So shall we have a better execution on the same for sales?
And also on margins, we -- this all-you-can-eat campaign, how this -- will you have any near-term margin while this wall efficiency gain at the same store sales up again [leverage capacity] of pizza and this will be a positive driver for the recipe. So just for the other that income, for the rest of the quarter, how should we think about the good performance in first quarter to carry out of Pizza Hut?
Thank you very much.

Adrian Ding

Thank you, Michelle. Yes, if it's okay with you, let me take this chance to actually address a question for both our pizza and KFC and the group as a whole. Obviously, in terms of SSSG, but your question, you know, brings down to 2.1 is top-line one is the margin.
As big a hotline first, in terms of SSSG, the market environment is still quite evolving and our complex. Consumers stay rational. And as Tony mentioned, while we have not observe any significant negative impact of business to date, we'll continue to be watch for the development.
And April trading is generally in line with our expectation. But it's worth noting that for the month of June, we have a tougher lobbying for that month. So overall for the quarter two, we're striving to achieve a 10-consecutive quarters of positive, same-store transaction growth.
But amid the uncertain market conditions, we remain cautious about the potential fluctuations in same-store sales index. And this common is that is true for both KFC and Pizza Hut and now, comes down to margin, like specific to Pizza Hut or indeed the Pizza Hut all-you-can-eat campaign that took place in quarter one last year was shifted to quarter two this year.
So there is, you know, how there's a quarterly shifting and on margins. But broadly speaking, in terms of the margin on an outlook for the two brands, respectively. I will say there was no change to our 2025 full-year guidance on margin.
We expect the core OP margin for the Group as a whole to stay either steady or slightly improve. Right, that's our guidance provided three months ago.
And by brand specifically, we expect a restaurant margin for KFC to be healthy and stable year over year in this year and also over the mid to long run and for Pizza Hut margin to slightly improve this year and for mid to long run, hopefully, the restaurant margin for kids hub will improve in a bigger magnitude compared to this year.
On the top line and you know, the top-five optimally, obviously, a very important factor, you know, deciding on the restaurant margin. We reaffirm our guidance for the top-line growth, which is a mid-single digit growth in the system sales.
And then I also like to take this opportunity to provide some more color on the line-by-line, our margin outlook by foreseeable, as I mentioned, there is a quarterly shifting the focus of all can you campaign. But more broadly speaking for you as a whole, we expect modest improvement year over year.
This year over last year, mainly driven by the benefits of Project Red Eye and deflation and will continue to look to return much of the benefits to our consumers, will continue offering great value for money to our consumers.
I'm breaking down into these two brands. You know, specifically, we expect a few as for KFC to be -- remain in the range of 31% to 32% for the full year and for Pizza Hut to be in the range of 32% to 33% for the full year.
And again, all this presented have a model -- will have a modest impact, a modest improvement year-over-year, this year over last year.
For [COL], you know, as mentioned in the previous earnings release, we face some headwinds on a few L. front, particularly, you know, because of the increase in delivery mix, although the delivered cost per order decreased this year, but you know the driven by the increase in delivery mix. So overall rider cost as percentage of sales will increase for the group and for the two brands this year.
I will make all efforts to tried to offset the wage inflation, which as you know, kind of the month, long-delivery part, right, the efficiency gain by the simplification, automation, and centralization. So tried to keep the non-delivery part of cost of labor to be stable year over year, and then comes to occupancy and other half as presence of sales, that line item is likely to stay stable.
And we continue to explore optimization opportunities to offset the cost increases within that line item. And I think is very important to note and as you also alluded to in the question, there is a quarterly phasing for the margin. We expect tougher year-over-year comparison on both the restaurant margin and operating profit margins are later in the year.
And this is because more meaningful benefits started to trickle in for Project Fresh Eye from quarter two of last year and from Project Red Eye from second half of last year. And obviously, the tailwinds from the favorable commodity prices will be now growing in the second half of this year as well.
And lastly, a couple of items of interest income will obviously be lower as a result of lower cash balance, given we significantly stepped up our shareholder return and also there may be some headwinds on foreign exchange rate.
And you know, I guess one-off item is the mark-to-market equity investment impact on Meituan, that's a volatile quarter-over-quarter and year-over-year.
So overall, we maintain our we maintain reaffirm our annual guidance on margin and our top line. And then, you know, in terms of that line-by-line color, that's outside this slide. Thank you, Michelle.

Michelle Cheng

Thank later for the very detailed line-by-line combination.

Operator

Brian Bittner from Oppenheimer & Co.

Brian Bittner

Hi. Just for your investors outside of China, can you just maybe talk more about consumer environment in China and how it's evolving so far in 2025? Are you seeing any positive indicators of may be a potential inflection moving forward in the consumer?
And separately, just I wanted to address the transaction growth, particularly at KFC, it's been very solid transaction growth up 4% in the first quarter. Can you help us understand how this compares to the industry?
What is the industry transactions looking like, so we can understand how much market share to KFC is taking, recently?

Joey Wat

Thank you, Brian. Let me start with the consumer sentiment. We have not seen sort of very different consumer sentiment change, so far.
But if I could make some general comments of our consumer preference and that sort of reflecting in our numbers is that presents towards sort of the wider price range and more -- and probably with the even better entry price and still very innovative food. So that is still working for us.
And therefore, you know, you can see our transaction and are growing very nicely both in terms of our food business, entering business. So the food business is the process and then the delivery business as well. We have and capture very nice incremental sales from lower delivery order, particularly in lower-tier cities.
So that helps a lot because the delivery transaction for KFC, the TC growth actually is 24%, while the delivery sales is 13%. Similar trend in Pizza Hut, while the Pizza Hut also achieved 13% growth in delivery, the transaction growth for the lower TA, about [30 to 60] TA is actually over [50%] growth. So that gives you a sense of where we are going.
And also in terms of strength, I just want to quote you one number. Our KCOFFEE, so the coffee that we sell in all our cash is still at the increase of cups and sales is actually 20%. So that is sort of overall direction.
And I think you know, we see sort of similar trend in the industry, but I'm happy to report in both KFC and Pizza Hut based on our limited information because it's a very fragmented market, anyway. We see some meaningful increase of our market share, particularly in that delivery business.
So I hope that gives you a sense about where things are going forward. We still stick to our focus still focused, one is innovation. That means installation innovations in food and in everything we do.
And then operational efficiency. And you know, and that's where we see our margin from -- and supporting our innovations. One last introduction of innovation, look at our KCOFFEE business, not only coffee, we're actually moving to tea as well.. So I hope that gives you a flavor of where things are.

Operator

Chen Luo, Bank of America.

Luo Chen

First, congrats on the same-store sales growth, coming flattish in Q1. And just out of here, I mentioned it [even] happens by my daughter is a big fan and coffee drinker if it actually means that separately?
Yes. So my question is regarding the new store expansion. In our earnings announcement, I noticed that new store contributes around 4% revenue growth despite around 11% something, new store year-over-year growth.
And last quarter, in Q4 last year, the new unit growth also contributed only roughly around 5% revenue growth. So if you do the math, if we compare the revenue growth from new stores divided by the new store expansion pace, so this gives you roughly around 40% solvency ratio.
I understand that we tend to [order] smaller and smaller stores, and I guess this could represent a long-term trend in the future. Is it fair to say that in the foreseeable future, because of our mix shift towards smaller stores for around 10% to 11% used of expansion, we can only expect a wrong for or at best 5% something revenue growth from new stores because of the dilutions of the smaller new stores opened.

Adrian Ding

Thank you, Luo Chen. Let me address the question correctly. I think for this year, as we mentioned in the prepared remarks, you know, in terms of the growth rate within our top line, we do expect the system sales to be in the mid-single digit range. So that's a reaffirmation of our guidance.
We target to open, you know, 600 to 800 net new stores, and I wish there was some timing quarterly timing shifts for the new openings this quarter versus the rental quarter of the year. And then specific to a question on the 4% of net new units contribution to the top line.
You know, you mentioned the 10% of net new store increase as percentage, but obviously that's the end of the quarters to account. And you know, even with all at the end of store end of Q2 account growth rate, the same store week when we opened our Costa for within the quarter is actually up very important factor as well.
So, you know, the end of the quarter store count only tells one of the north side of the store. And you know, obviously on a 4% that you had a contribution. No, we are opening smaller stores as we expand into lower tier cities. Around 70% to 80% are new to us in this quarter.
Our smaller stores that opened in this quarter, our smallest was and as we got into the market previously in previous earning release, new store sales are around 50% to 60% of our mature stores in terms of the weekly sales, and there's a ramp-up period for the new store sales to We mentioned previously that normally three years of ramp-up period when the news to adjust to a mature store.
And importantly, our new store remain very healthy and maintain very healthy payback period on profitability. Specific to this quarter, writing or addition to the smaller store factor this quarter, we strategically close more stores to enhance the strength of our store portfolio.
As we mentioned in the prepared remarks, and the net new store or a net new store open figure will normalize as the year progresses. So that's a lot this year. Right.
But speaking of mid to long run, you know, if we opened, let's say 10%, 11%, 12% of net new stores in the quarter end figure was the off system sales growth rate was up mid-single digit or low single digit, high single digits, I guess you know, the store week and the smaller stores store arguments one site, you'll see other back and put out aspect as the same-store sales growth.
And as we mentioned, not just now we remain cautious on the near term, especially this year same-store sales index. You know, there may be some fluctuations there in the mid to low-end.
Obviously we don't have the crystal ball will control things within our control and continue to deliver excellent value for money for consumers. And then if we can have some benefits in the mid to long same-store sales growth will benefit the top-line a system serves us well for us and hopefully that addressed your question.
Thank you. So that's very helpful. I also look for for you on more cooperation with more IPs because my data center of Fortis uncompromised. Keith, thank you. The IPs that super to offer emotional values for young people just as important as a valuable. So in a physical well in all the virtual world physical well, we have to take care of both these days.

Operator

Christine Peng, UBS.

Christine Peng

Hello, and thank you for the opportunity to have the question. So my question is about the key coffee. So Joe, you mentioned that the this year you plan to open 200 more KK. coffee stores than your initial target. So can you share us more long-term view towards this goal? Coffee? And I was also wondering what's the impact on the CASTR. store economics on by opening our key coffee side by side?

Joey Wat

Thank you, Christine. In the long term. We are committed to the KCOFFEE business and particularly the take-or-pay business because we see very promising growth momentum of this particular business right now. Our target is 1,500 cafe by end of 2025 to 100 more. And we only started last year and the most promising is huge.
Huge percentage of our members have not yet tried the key coffee, and that is fantastic base in terms of the top line and bottom line at the top line is very nice addition, additional same-store sales growth for the stores with the state coffee per se, and I'm is assume sort of low single-digit, but it's very nice to that particular store.
And then in terms of bottom line, because we share the equipment and share their location, we share the cost of labor. So the bottom line is open very protected as well. So these two are both very important to our business as well. And I could comment on the sub debt, which is the business.
The menu beyond ended and demand included two entering. We are making very good progress. And although we only start to open the peak of the Company last year, but in 2024 alone, we launched 52 coffee drink of item.
And we already have some very nice signature product like sparkling coffee, like a gigantic eight cap and some will recur key the cookie the right way to describe this product.
You already know recipe chicken, let's say, a bit challenging in terms of name, but I can assure you that the pace is we see quite good. And then this year, we are moving on to introduce more premium Asia being or just 12.9. And so the product itself of at getting into the mindset of the customer.
And as I mentioned earlier, we evidence that the launch of the manufacturing and as of right now is we sell launching, but the tea leaf losing with payers were also. So we are committed and we are very high positive about about this key coffee cafe not only drive the uplift in top line but also drive incremental profit.

Operator

Sijie Lin, CICC.

Sijie Lin

Hi, thank you, Joey. And the Asian. I have one question. So we are doing good on new products, new store model, higher operational efficiency and the wells are doing good on brand marketing by.
Regarding the brand marketing, maybe there's some new trends in the market, but for example, some of focusing on healthiness, some of focusing on the emotional value, which I'll talk about that of repurchasing like brand ambassadors, joint brands, IP, toys that are popular among consumers and maybe some are connecting the brand promotion with product innovation.
So do we have any new observations and evolving plans regarding this aspect? Regarding the brand marketing. Could you talk more about this in queue? Thank you. Third year of all tied to respond to your question in two ways.
One is our strength in brand marketing certainly is shown through our ability to market tragic and our pizza brand almost as a bit of fashion hotel, our brand, you know, we always stay in touch with our consumers in terms of their preferred IP. and something relevant to them.
And we would like to believe that we grow with them to go out with the mobile growth period. So we'll continue to do that. A cylinder we've been doing, I mean, essentially.
And then you also asked about at the trend in terms of how the two, et cetera, et cetera. Well, I mean, we plan to reduce that this concept to our interest in and of you guys in our Investor Day. So please fill it out.
Just a chance to make advertisements are that is, is that module is a module called petrol and some of you guys have already tried a product. So what is April is a module gain as we continue to share the care C-store space and membership equipment, everything why sharing?
Because the incremental investments very light and we have some of these stores in Beijing and Shanghai in particular and manual is very different than that. Very focused. It means very short menu. There, particularly focused on energy bills and smoothly.
So what we call this assume a customer, they are there that they also are kept the members that we give them with slightly different food. And so far, we will realize what we have seen in both Shanghai and Beijing. Actually there's some all is said and done as well as you cross the border from Hong Kong is. And then you can trade a product.
I mean, I like it myself very much and as so as our KFC members. So we do have tried to use all of a slightly different for our customers. Could you just talk about the new concept without trying to fool with value guys even higher were?
So we are looking forward to build more of these stores, particularly in Tier one, Tier two cities and then hopefully we'll have a chance to introduce a full man. I know for many a wider range of manager you guys when you come to the investor day later 100 year. I'll pause here. Thank you.

Joey Wat

Thank you, Gian. Looking forward to the Investor Day, the new product concepts in Q2 yet. And if I can add on the Pizza Hut, we have amazing innovation as well. And last year, we have tried the WOW piece of our menu and will continue to streamline the menu and will continue to work on menu of is there a way we include that in the Investor Day as well?
Thank you. Frankie due to time constraints. This concludes our question and answer session. So I'll hand the call back to Florence closing remarks.

Florence Lip

Thank you. And thank you, Joey and Adrian. And this concludes our Q&A session. And before we end the call, as Julie mentioned, we're going to host our Investor Day later this year. It will be in November and our tier one city in China will provide more details in due course.
Thank you for joining the call today here in Q1 and Q2 of this concludes today's conference call. Thank you for participating. You may now disconnect.