The Tale of Yum China
Over the past year, investors witnessed a tumultuous period for shares of Yum China Holdings, Inc. (YUMC) as they plummeted by 37.8%, juxtaposed against the industry’s modest growth of 4.3%. As the dust settles, many are left wondering – is this the nadir or the start of a renaissance for this once high-flying company?
The Path Forward: A Beacon of Hope
The spirited management at YUMC is unfazed by the recent setbacks and is steered by a vision that appears both ambitious and pragmatic. The institution recently unveiled an all-encompassing strategy, RGM 2.0, aiming at financial prosperity between 2024-2026. By leveraging innovative store formats and forming strategic partnerships with franchisees, Yum China intends to broaden its network to a commendable 20,000 stores by 2026, driving high single-to-double-digit CAGR for system sales and operating profit.
Moreover, the company is also focusing on nurturing customer loyalty, with over 470 million members enrolled in its loyalty program, a digital ecosystem that successfully attracted new members and fostered greater engagement, as evidenced by member sales contributing nearly 65% to total system sales in Q4 2023.
Spicing Up the Menu for Success
Yum China has been busy refreshing its menu offerings, introducing over 500 new or upgraded products in 2023 alone. The company’s strategy includes a tantalizing lineup of menu offerings and promotional deals tailored for the festive Chinese New Year season, highlighting the premium Wagyu beef pizza from Pizza Hut and the tantalizing fried egg in spicy sauce chicken burger from KFC.
The Digital Frontier: A New Frontier
Embracing the wave of digitalization, YUMC has seen a surge in digital sales, exceeding $9.2 billion in 2023, with a substantial portion originating from its proprietary Super APP, attaining a 35% year-over-year increase. With a robust market presence, the company exudes confidence in maintaining the digital momentum in the near future.
Image Source: Zacks Investment Research
Surveying the Landscape
While Yum China (YUMC) embarks on this journey of resurgence, it is worth noting some other notable contenders in the industry. Amongst them are Brinker International, Inc. (EAT) with a Zacks Rank #1 and a remarkable 212.7% average trailing four-quarter earnings surprise, and Texas Roadhouse, Inc. (TXRH) with a Zacks Rank of 2 and a 41.6% surge in the past year.
CAVA Group, Inc. (CAVA), another Zacks Rank 2 gem, shines with an average trailing three-quarter earnings surprise of 533.3%. As these stalwarts fortify their positions, Yum China sets sail on its quest for revival, poised to reclaim its former glory.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
