Same-Store Sales Growth for Yum! Brands’ China Division in 3Q16



Same-store sales growth

Same-store sales growth (or SSSG) is expressed as a percentage. It’s a measure of the increase in revenue from a company’s existing restaurants over a certain period. For 3Q16, Yum! Brands (YUM) posted systemwide SSSG of 1% against analysts’ estimates of 2.2%.

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China division

The China division’s SSSG fell 1%, with KFC posting a fall of 1% and Pizza Hut falling 4%. YUM management blamed the tension in the South China Sea. The ruling by the International Court of Justice regarding the South China Sea led to protests and boycotts against international brands. YUM estimated that the tension could have negatively affected the China division’s SSSG 4%–5%. However, SSSG improved toward the latter part of 3Q16 and at the beginning of 4Q16.

Global brands

Moving to global brands, the KFC and Taco Bell divisions posted SSSG of 4% and 3%, respectively. SSSG for Pizza Hut fell 1%.

In 3Q16, KFC’s performance in all the markets was positive with strong performances in Russia, Europe, and Africa. In the United States, the Extra Crispy campaign increased SSSG 6%.

Taco Bell posted SSSG of 3% in the United States with transactions contributing 1%. SSSG was driven by the $1 breakfast, the $1.49 Steak Flatbread sandwich, and the $5 boxes.

SSSG for Pizza Hut in the United States was negatively impacted by competition and unsuccessful promotions. Thailand was a bright spot for Pizza Hut in 3Q16. It posted double-digit sales and transaction growth by focusing on product and operational improvements.

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Peer comparisons

In 3Q16, Domino’s Pizza (DPZ), Papa John’s (PZZA), and Starbucks (SBUX) are expected to post SSSG of 7.5%, 4.6%, and 4.9%, respectively.

What’s the outlook?

Yum! Brands’ management has set the company’s systemwide SSSG guidance at 2%–3% for 2016. Analysts expect YUM to post systemwide SSSG of 1.9%. They expect KFC, Pizza Hut, and Taco Bell to post SSSG of 2.3%, 0.8%, and 1.3%, respectively.

In 1Q17, 2Q17, and 3Q17, analysts expect YUM to post systemwide SSSG of 2.2%, 2.6%, and 2.6%, respectively.

Next, we’ll look at Yum! Brands’ unit growth.


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