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More than 100 outlets, likely KFC restaurants, will be opened at
gas stations owned by Sinopec Corp and China National Petroleum
Corporation (CNPC) over the next three years, Yum China said on
Tuesday, without giving any financial details. The two Chinese
oil firms collectively operate over 50,000 gas stations in the
country.
"It's something quite new for both of us, we're going to open
some stores and figure out the economics, once we figure out the
economics then we can be more specific on the financials," Yum
China' Chief Executive Joey Wat told Reuters in an interview
after an investor day it held in Shanghai.
"We only have a very modest goal in the coming three years,"
The New York-listed firm, spun off from Yum Brands Inc in 2016,
owns Pizza Hut, KFC and Taco Bell in China and is the largest
fast-food operator there with more than 8,400 outlets, which it
intends to expand to 10,000 by 2021.
Wat said the company was adapting to changes in China's economy,
whose growth has slowed to a 28-year-low. For example, the
company was rolling out more value promotions to meet demand
from customers who were seeking more value-for-money deals.
These promotions and other factors could put pressure on KFC's
restaurant margin in the first half, Yum China said, though it
added that it had the capacity to return $1.5 billion to
shareholders over the next three years. The company had flagged
both the margin pressure and how much it could return to
shareholders last month with its quarterly results.
TOUGH SHIP TO TURN
While sales at its KFC chain have largely stabilized after a
period of weakness, thanks to upgraded stores and a big push on
delivery, Yum China has been trying to revive performance at
Pizza Hut, which has posted just three quarters of positive same
store sales growth in China since the start of 2014.
In February, Yum China, reported a 6 percent year-on-year rise
in total system sales for the fourth quarter, led by KFC, but
sales at Pizza Hut dipped 2 percent during that period.
Wat said in 2017 that a turnaround could take up to two years to
bear fruit. Towards that goal, the firm has so far rolled out a
new store design and a series of promotions. It will introduce a
new menu with 15 percent fewer items next week.
She said on Tuesday that while same store sales had yet to
recover, the business had hit a milestone in the fourth quarter
when traffic growth turned positive.
"When we are turning the ship, when we work hard to get the
momentum to turn, it's not easy, there are many forces at work,
but we certainly feel like we are on the right track and doing
all the right initiatives," she said.
"At the time we set out a very aggressive time frame...but
management does not have a crystal ball either," she added. "We
still have a little bit of time."
(Reporting by Brenda Goh; Editing by Himani Sarkar and
Muralikumar Anantharaman)
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