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September 15, 2021

Covid-19 Delta variant outbreak to impact Yum China’s quarterly profits

More than 500 Yum China stores in the country were either closed or offered only delivery services last month.

The mainlaind China licensee of Yum! Brands, Yum China Holdings, anticipates a significant hit to its adjusted operating profits in the third quarter of 2021 due to the recent Covid-19 Delta variant outbreak.

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The company said that more than 500 of its stores across 17 provinces were closed or offered only takeaway and delivery services at the peak of the outbreak last month.

Same-store sales for the month of August 2021 dropped by ‘mid-teens percentage year over year’, or close to an approximately 20% decline compared to August 2019.

This was primarily due to a decline in same-store dine-in sales in August by approximately 20% to 30%, as well as due to a sharp drop in sales at transportation and tourist locations.

Based on current trends, the adjusted operating profits of Yum China may drop by 50% to 60% for the third quarter of 2021, compared to figures from the same period last year.

In a statement, Yum China said: “While the outbreak has subsided in recent days and restaurant traffic is gradually recovering, our operations continue to be heavily impacted.

“As we have previously noted, our business recovery remains to be uneven and nonlinear, as regional outbreaks occur and corresponding public health measures are implemented. The Company expects a recovery of same-store sales to take time.”

Yum China Holdings holds exclusive rights to operate KFC, Pizza Hut and Taco Bell brands in the mainland.

At the end of June 2021, the company had around 11,023 restaurants in more than 1,500 cities in China.

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What is the impact of China’s Zero-COVID lockdowns on economic activity, consumer goods and the foodservice industry?

While wanting to protect the country from being overwhelmed by Omicron, China’s adherence to a Zero-COVID policy is resulting in a significant economic downturn. COVID outbreaks in Shanghai, Beijing and many other Chinese cities will impact 2022’s economic growth as consumers and businesses experience rolling lockdowns, leading to a slowdown in domestic and international supply chains. China’s Zero-COVID policy is having a demonstrable impact on consumer-facing industries. Access GlobalData’s new whitepaper, China in 2022: the impact of China’s Zero-COVID lockdowns on economic activity, consumer goods and the foodservice industry, to examine the current situation in Shanghai and other cities in China, to better understand the worst-affected industry sectors, foodservice in particular, and to explore potential growth opportunities as China recovers. The white paper covers:
  • Which multinational companies have been affected?
  • What is the effect of lockdowns on foodservice?
  • What is the effect of lockdowns on Chinese ports?
  • Spotlight on Shanghai: what is the situation there?
  • How have Chinese consumers reacted?
  • How might the Chinese government react?
  • What are the potential growth opportunities?
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Enter your details here to receive your free Whitepaper.

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