Yum China (NYSE:YUMC) Reports Sales Below Analyst Estimates In Q1 Earnings

YUMC Cover Image — Yum China (NYSE:YUMC) Reports Sales Below Analyst Estimates In Q1 Earnings

Kayode Omotosho

Wed, Apr 30, 2025, 3:40 AM 5 min read

Revenue: $2.98 billion vs analyst estimates of $3.10 billion (flat year on year, 3.7% miss)
Adjusted EPS: $0.77 vs analyst expectations of $0.78 (1.5% miss)
Adjusted EBITDA: $514 million vs analyst estimates of $538.7 million (17.2% margin, 4.6% miss)
Operating Margin: 13.4%, in line with the same quarter last year
Free Cash Flow Margin: 10.6%, up from 8.6% in the same quarter last year
Locations: 16,642 at quarter end, up from 15,022 in the same quarter last year
Same-Store Sales were flat year on year (-3% in the same quarter last year)
Market Capitalization: $17.39 billion

Total system sales grew 2% year over year ("YoY"), excluding foreign currency translation ("F/X").

Company Overview

One of China’s largest restaurant companies, Yum China (NYSE:YUMC) is an independent entity spun off from Yum! Brands in 2016.

Sales Growth

A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.

With $11.33 billion in revenue over the past 12 months, Yum China is one of the most widely recognized restaurant chains and benefits from customer loyalty, a luxury many don’t have. Its scale also gives it negotiating leverage with suppliers, enabling it to source its ingredients at a lower cost. However, its scale is a double-edged sword because there is only so much real estate to build restaurants, placing a ceiling on its growth. To expand meaningfully, Yum China likely needs to tweak its prices, start new chains, or enter new markets.

As you can see below, Yum China’s sales grew at a sluggish 4.9% compounded annual growth rate over the last six years (we compare to 2019 to normalize for COVID-19 impacts) as it barely increased sales at existing, established dining locations.

This quarter, Yum China’s $2.98 billion of revenue was flat year on year, falling short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 6.7% over the next 12 months. While this projection implies its newer menu offerings will fuel better top-line performance, it is still below the sector average.

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Restaurant Performance

Number of Restaurants

Yum China sported 16,642 locations in the latest quarter. Over the last two years, it has opened new restaurants at a rapid clip by averaging 12.6% annual growth, among the fastest in the restaurant sector.

When a chain opens new restaurants, it usually means it’s investing for growth because there’s healthy demand for its meals and there are markets where its concepts have few or no locations.

Same-Store Sales

The change in a company's restaurant base only tells one side of the story. The other is the performance of its existing locations, which informs management teams whether they should expand or downsize their physical footprints. Same-store sales gives us insight into this topic because it measures organic growth at restaurants open for at least a year.

Yum China’s demand within its existing dining locations has been relatively stable over the last two years but was below most restaurant chains. On average, the company’s same-store sales have grown by 1.5% per year. This performance suggests it should consider improving its foot traffic and efficiency before expanding its restaurant base.

In the latest quarter, Yum China’s year on year same-store sales were flat. This was a meaningful deceleration from its historical levels. We’ll be watching closely to see if Yum China can reaccelerate growth.

Key Takeaways from Yum China’s Q1 Results

It was good to see Yum China meet analysts’ same-store sales expectations this quarter. On the other hand, its revenue missed significantly and its EBITDA fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 1.4% to $46.02 immediately after reporting.

The latest quarter from Yum China’s wasn’t that good. One earnings report doesn’t define a company’s quality, though, so let’s explore whether the stock is a buy at the current price. We think that the latest quarter is just one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.

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