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Despite the economic deceleration, Yum China Holdings, the parent company of KFC and Pizza Hut in mainland China, remains undeterred in its expansion plans. According to CEO Joey Wat, the company aims to inaugurate up to 1300 new stores in 2023, buoyed by robust Q2 results and favorable growth prospects in the Chinese market.
In an interview with Reuters following the company's positive second-quarter results, which showed a 25% increase in revenue, Wat expressed optimism about the growth opportunities in the Chinese market. She mentioned that Yum China intends to maintain a steady pace of opening 1100 to 1300 new outlets this year, while capital spending is expected to range between US$700 million to $900 million.
Wat emphasized that despite slower GDP growth, the Chinese market is still growing much faster than some developed markets, and it presents significant growth prospects due to its size. She highlighted that Yum China has successfully expanded not only in lower-tier cities but also increased its presence in top-tier cities, yielding positive results.
China's post-Covid recovery has encountered challenges recently, with domestically and internationally weakened demand. However, the catering and tourism sectors have shown resilience as Chinese residents have sought new leisure activities.
While acknowledging the need for time to adjust to the lifting of Covid restrictions, Wat noted that small waves of infections have impacted consumption. Despite this, overall traffic has started to recover, although spending per person has decreased as consumers have become more cautious in their expenditures.
As we enter the summer trading period, Wat highlighted that traffic is gradually increasing, particularly in tier 2 cities, as people venture out on trips. She acknowledged that after three challenging years, it takes time for people to recover fully.
In its second-quarter report, Yum China Holdings announced a net income of $197 million, a substantial surge of 138% compared to last year.
Photo: Aleks Dorohovich/Unsplash
