YUMC - Yum China slumps nearly 20% after flagging softening demand wage inflation for Q4

2023-11-01 10:08:12 ET

U.S.-listed shares of Yum China ( NYSE: YUMC ) on Wednesday slumped as much as 19.4% , after the operator of KFC and Pizza Hut restaurants in mainland China missed on Q3 top and bottom line estimates and pointed to softening demand in Q4.

YUMC stock was last down 17.2% to $43.51 in morning trade.

YUMC after hours on Tuesday reported Q3 adjusted earnings per share of $0.59, which missed estimates by 3 cents. Revenue rose 9% Y/Y to $2.91B, but missed expectations by $180M.

Yum China's ( YUMC ) Q3 same-store sales rose 4% Y/Y, with increases of 4% at KFC and 2% at Pizza Hut in constant currency.

The company added 1,155 net new stores in the first three quarters of this year, and has increased its full year target to 1.4K to 1.6K net new stores from a prior range of 1.1K to 1.3K.

However, YUMC CFO Andy Yeung warned of "softening consumer demand" emerging in late September through October.

"Looking ahead, the fourth quarter is a seasonally small quarter in terms of sales and profits; hence small fluctuations in sales could have a more pronounced impact on our margins," Yeung said in a statement .

"It is important to highlight that during the fourth quarter last year, we received temporary relief of $26M, which is not expected to repeat this year," the finance chief added.

Lapping of that temporary relief was one of the main drivers of a decline in Yum China's ( YUMC ) Q3 restaurant margin to 17% versus 18.8% a year ago.

Moreover, CFO Yeung on the earnings conference call said that the company anticipated wage inflation of mid-single digits in Q4, as it expected to return to more normalized staffing levels following a labor shortage due to COVID-19 cases last year.

Yum China ( YUMC ) also declared a quarterly dividend of $0.13/share.

More on Yum China

• Yum China Holdings, Inc. 2023 Q3 - Results - Earnings Call Presentation
• Yum China Plans Post-Pandemic Binge With Major Expansion
• Biggest stock movers today: Paycom Software, CRISPR Therapeutics and more
• Yum China rallies after targeting $3B in capital allocation to shareholders
• Seeking Alpha's Quant Rating on Yum China

For further details see: