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Yum China Sales Suffer As Omicron Cases Surge

Published on Mar 16 2022 2:26 PM in Restaurant tagged: Taco Bell / pizza hut / KFC / Yum China

Yum China Sales Suffer As Omicron Cases Surge

Yum China Holdings Inc 9987.HKYUMC.N has said that a COVID-19 resurgence in the country in recent weeks had dented sales in the first quarter, setting back the revival its KFC, Pizza Hut and Taco Bell joints had last year.

Details

Same-store sales decreased around 20% from a year earlier for the first two weeks of March and was still trending down in recent days, after falling nearly 4% for the two months combined in January and February, Yum China said.

"Entering March, the situation has rapidly deteriorated with the highly transmissible Omicron variant causing outbreaks across China, including economically important regions of Guangdong, Shanghai, Shandong and Jilin," the company said.

The restaurant chain recorded a 1% fall in same-store sales last year, an improvement from the 9% decline in 2020. However, tight curbs on travel and dining out due to the rapid spread of the Omicron coronavirus variant have hurt sales this year.

The company projected an operating profit for the first quarter to be in a range of $165 million to $200 million, compared with $342 million a year earlier.

China has reported more local symptomatic COVID-19 cases so far this year than it recorded in all of 2021, as the highly transmissible Omicron variant triggers outbreaks from Shanghai to Shenzhen.

Over 1,100 Yum China restaurants were temporarily closed or offering only takeaway and delivery services, as of Sunday 13 March. It had more than 12,000 restaurants, as of February end.

Yum China's shares, which have taken a beating in recent days due to an auditing dispute between Beijing and Washington, fell as much as 10.5% to $33.55, a three-year low.

Yum China, BYD Say China's COVID Curbs Have Impacted Operations

The above news was followed by news that Chinese businesses from automaker BYD 002594.SZ to KFC operator Yum China 9987.HK say that their operations have already been hit by the country's latest COVID-19 curbs, with more disruption expected as case numbers rise.

The impact on companies comes as China battles its worst outbreak since the start of the coronavirus pandemic in early 2020. It posted a steep jump in daily COVID infections on Tuesday 15 March, with new cases more than doubling from a day earlier to a two-year high.

Yum, the operator of KFC and Pizza Hut restaurants in China, said late on Monday 14 March during a regular earnings briefing that its operations had been significantly impacted by the latest outbreaks, and same-store sales fell 20% year-on-year in the first two weeks of March.

BYD, headquartered in Shenzhen where most companies have been told to ask staff to work from home, said that there had been some impact on production at its site in the city.

"We are actively coordinating a response and carrying out epidemic prevention and control as required by the government," the company said.

Many provinces and cities across the country have been carrying out mass testing, with some shutting down public transport and cordoning off apartment blocks and office buildings.

Other companies that have reported disruptions include Chinese flash storage company Netac Technology 300042.SZ. It said some shipments would be delayed as it had to suspend work at its Shenzhen facility. Meanwhile Apple AAPL.O supplier Lens Technology 300433.SZ said its unit in Dongguan city had stopped production.

iPhone assembler Foxconn 2317.TW, Toyota 7203.T and Volkswagen VOWG_p.DE also said on Monday 14 March that they have had to shut factories.

News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition.

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