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Yum China Sees Fledgling Signs of Traction As It Recovers From a Coronavirus Rout

By Asit Sharma - Mar 23, 2020 at 12:46PM

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The company relayed a few encouraging signs to investors on Monday.

It may be a long while before life returns to normal, but Yum China Holdings (YUMC 4.37%) provided investors with a business update on Monday that illuminated a few bright spots and early signs of business traction as the COVID-19 pandemic continues to subside in China.

Management of the mainland China KFC and Pizza Hut licensee relayed that 95% of stores are now open, while between 10% and 20% are only providing takeout and delivery services. This compares to an open-store percentage of just 65% at the peak of the coronavirus emergency in China in February.

A view of the Beijing skyline from a distance on a clear, bright morning.

The Beijing skyline. Image source: Getty Images.

Management noted that recovery among stores is uneven and that some locations are still operating under shortened hours. Same-store sales over the last several days are down 20% against prior-year measurements.

On a more promising note, the company honed its delivery acumen during the outbreak, introducing contactless delivery in China. This has understandably become a popular sales channel during the crisis -- delivery sales are growing year-over-year, and they've recently doubled as a percentage of total company sales.

Capitalizing on changed dining patterns, Yum "subsequently launched contactless pick-up and corporate catering services as highly sanitary options for consumers and corporate customers," while providing delivery services to heavily impacted quarantined communities in February and March.

Looking forward

Getting 95% of its restaurants back in operation -- even as many maintain reduced hours -- is a positive step for Yum Brands. While it's extremely hard to predict when the company will achieve pre-crisis sales levels, it's likely to see a long-term benefit in the form of increased delivery and catering, and it may also gain from its contactless service innovations. Investors will receive a clearer financial outlook when the company reports first-quarter earnings in a little over four weeks, on April 28.

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