Yum China Q3 Profit Rises 13%, Store Target Raised

Yum China Holdings Inc. (NYSE: YUMC; HKEX: 9987) reported a 13% year-over-year increase in third-quarter operating profit and raised its 2026 store-opening target after record net additions in the first nine months. The restaurant operator now plans to open more than 2,400 net new stores this year and finish 2026 with over 20,500 locations.

Total revenue for the quarter ended Sept. 30 rose 8% to $3.48 billion, while operating profit increased to $451 million from $400 million. Operating margin expanded by 50 basis points to 13.0%, marking the 10th consecutive quarter of year-over-year margin expansion. Restaurant margin also increased by 50 basis points to 17.8%.

Foreign exchange contributed materially to reported growth. Excluding currency effects, revenue rose 2% and operating profit increased 6%. Core operating profit, which excludes special items, items affecting comparability and foreign-exchange effects, advanced 6% to $423 million. Diluted earnings per share grew 20% year over year, excluding mark-to-market equity investment and foreign-exchange effects.

System sales increased 3% excluding foreign exchange, supported by new-store contributions. Same-store sales were 97% of the prior-year level, even as same-store transactions increased for the 15th consecutive quarter. Yum China attributed core profit growth to streamlined operations, favorable commodity prices and Pizza Hut license-fee savings. Value-focused offerings, sales deleverage and higher delivery costs associated with a larger delivery mix were offsets.

Store expansion accelerates

Yum China ended the quarter with 19,989 stores after adding 692 net new locations during the period. Net additions reached a record 1,888 in the first nine months, prompting the company to lift its full-year target to more than 2,400 from its prior plan. It continues to target more than 30,000 stores by 2030.

Expansion included both company-operated and franchised locations, as Yum China used a wider range of store formats to enter smaller markets. KFC had entered more than 370 new cities over the previous 12 months and operated in over 2,800 cities, while Pizza Hut entered more than 350 new cities and was present in over 1,300 cities.

Average investment for stores opened in the first nine months declined to about RMB1.1 million per KFC location from RMB1.3 million to RMB1.4 million a year earlier. Pizza Hut’s average fell to roughly RMB0.8 million from RMB1.0 million to RMB1.1 million. The company estimated average pre-tax cash payback periods of about two to three years for both brands, based on stores opened from July 2024 through June 2025.

KFC and Pizza Hut post profit growth

KFC system sales rose 3%, while operating profit increased 10% to $425 million. Excluding foreign exchange and other specified adjustments, core operating profit grew 4%. Operating margin expanded 30 basis points to 16.3%, and restaurant margin increased 10 basis points to 18.6%.

The brand added 518 net new stores during the quarter, bringing its total to 14,307. Same-store sales were 97% of the year-earlier level: transactions rose 3%, but average ticket declined 5% to RMB36 as smaller orders grew and the brand pursued mass-market customers.

Pizza Hut added 191 net new stores, ending the quarter with 4,740 locations. System sales increased 1%, and operating profit climbed 29% to $73 million. Core operating profit rose 21%, while operating margin expanded 210 basis points to 11.0%. Restaurant margin improved by 190 basis points to 15.3%.

Pizza Hut’s same-store sales were also 97% of the prior-year level. Transactions rose 5%, extending the brand’s run of transaction growth to 15 consecutive quarters, while average ticket fell 8% to RMB65.

Yum China said dine-in and takeaway performance improved sequentially as delivery-platform subsidies eased. Delivery remained a major sales channel, accounting for 54% of KFC sales and 53% of Pizza Hut sales. Digital orders represented 94% of sales at both brands.

The company is also expanding newer formats. KCOFFEE Cafe had more than 4,000 locations at quarter-end and remains on track to exceed 5,000 by 2027. KPRO had over 700 locations and is targeted to surpass 850 in 2026 and 1,500 in 2027. Pizza Hut Burger Bar operated in more than 300 locations, with targets of over 500 in 2026 and 1,000 in 2027.

Capital returns and longer-term targets

Yum China said it remains on track to return $1.5 billion to shareholders in 2026 through dividends and share repurchases. From 2027, it targets returning about 100% of free cash flow to the parent company, with estimated average annual returns of at least $900 million to $1 billion in 2027 and 2028. These plans remain subject to market conditions, capital requirements and applicable approvals.

For 2026 through 2028, based on 2025 results, management continues to target mid- to high-single-digit compound annual growth in system sales excluding foreign exchange. It also expects double-digit compound annual growth in operating profit and diluted EPS, both excluding special items and currency effects, alongside high-single-digit growth in free cash flow per share. The company targets an annual same-store sales index of 100 to 102 over the period.

The outlook depends on Yum China’s ability to execute its development plans, control costs and sustain successful product innovation and marketing. The company also identified food safety, public-health conditions and changes in political, economic, trade and regulatory conditions in China and the U.S. as sources of uncertainty.