Yum China saw a significant negative market reaction after its first-quarter results for 2025. The company’s flat revenue and earnings growth, alongside performance that missed Wall Street expectations, were shaped by persistent rational consumer behavior and increasingly competitive dynamics in China’s food delivery sector. CEO Joey Wat noted that “consumer spending remains rational” and emphasized the company’s ability to maintain transaction growth at both KFC and Pizza Hut despite these headwinds. Management also highlighted continued operational efficiency improvements and value-driven menu innovations as partial offsets to a subdued top-line.
Is now the time to buy YUMC? Find out in our full research report (it’s free).
Yum China (YUMC) Q1 CY2025 Highlights:
- Revenue: $2.98 billion vs analyst estimates of $3.1 billion (flat year on year, 3.7% miss)
- Adjusted EPS: $0.77 vs analyst expectations of $0.78 (1.5% miss)
- Adjusted EBITDA: $514 million vs analyst estimates of $538.7 million (17.2% margin, 4.6% miss)
- Operating Margin: 13.4%, in line with the same quarter last year
- Locations: 16,642 at quarter end, up from 15,022 in the same quarter last year
- Same-Store Sales were flat year on year (-3% in the same quarter last year)
- Market Capitalization: $15.89 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Yum China’s Q1 Earnings Call
- Lillian Liu (Morgan Stanley) asked about the impact of heightened delivery aggregator competition and shifting consumer demand. CEO Joey Wat responded that April trends were in line with expectations and emphasized Yum China’s balanced strategy between aggregator partnerships and proprietary channels.
- Michelle Cheng (Goldman Sachs) inquired about the sustainability of Pizza Hut’s margin and same-store sales gains. CFO Adrian Ding reiterated expectations for stable-to-improving core operating margins but highlighted margin phasing effects due to promotional campaign timing.
- Brian Bittner (Oppenheimer & Co.) requested insight on consumer sentiment and KFC’s market share trends. Wat noted rational consumer behavior but pointed to Yum China’s transaction growth and increasing delivery share as evidence of market share gains.
- Chen Luo (Bank of America) questioned the dilution effect from smaller new stores and its impact on overall revenue growth. Ding explained that smaller formats yield lower initial sales, but healthy payback and ramp-up periods support long-term profitability.
- Christine Peng (UBS) asked about the KCOFFEE rollout and its effect on KFC store economics. Wat stated that KCOFFEE drives incremental same-store sales and profit with minimal additional investment, leveraging shared resources.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will monitor (1) the ramp-up of new store formats and their impact on system sales, (2) the company’s ability to defend margins amid rising delivery and labor costs, and (3) the effectiveness of value-driven menu innovation in offsetting subdued consumer sentiment. The pace of digital channel adoption and results from expanded KCOFFEE and WOW pilots will also be key indicators.
Yum China currently trades at $43.50, down from $46.67 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free).
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