Yum China Warns of Possible Losses as Virus Closes Outlets -- WSJ
07 Febbraio 2020 - 9:02AM
Dow Jones News
The company has shut many of its restaurants because of the
coronavirus outbreak
By Joanne Chiu
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (February 7, 2020).
China's largest restaurant company is bracing for a financial
hit from the coronavirus, fresh evidence of how the outbreak is
denting corporate profits and depressing the consumer spending that
Beijing hopes will power its economic growth.
The gloomy short-term prognosis from Yum China Holdings Inc.
reflects how the epidemic has hurt China's hospitality industry,
with some cities locked down and many customers staying home to
minimize the risk of infection.
Yum China, which runs more than 9,000 KFCs, Pizza Huts and other
restaurants in China, has been forced to close more than three in
10 outlets. And in January, Starbucks Corp. said it temporarily
closed more than half its stores in China, while McDonald's Corp.
has closed several hundred locations in Hubei province, the
epicenter of the outbreak.
In a conference call on Wednesday, Chief Executive Joey Wat and
colleagues said while many customers were avoiding eating out,
demand for delivery was holding up well and Yum China had rolled
out "contactless" services requiring less interaction between
drivers and customers.
"This arrangement helps to reduce the risk of human-to-human
infection and protect our staff, riders and customers," Ms. Wat
said, according to a transcript. Managers also said all couriers
were wearing face masks, which Yum China took great pains to secure
as demand rose.
At restaurants that stayed open, same-store sales plummeted 40%
to 50% since the Lunar New Year holiday from a year earlier, due to
shorter opening hours, reduced traffic and other factors, Yum China
said.
Same-store sales is a way of tracking performance at a retailer
or dining group's more established outlets. Yum China calculates
the metric only considering stores that were already open at the
start of the previous financial year. This year's Lunar New Year
holiday began on Jan. 25.
Reporting full-year results on Wednesday, Yum China warned of
possible operating losses for the first quarter of 2020 -- or even
for this full year -- if sales remained weak. It posted an
operating profit, which excludes interest and taxes, of $901
million in 2019.
The company said while it couldn't yet fully determine the
impact of the coronavirus disruption, it expected a "materially
adverse impact" on its results. Its shares fell nearly 3% in
after-hours trading, even after it reported better-than-expected
figures for the fourth quarter. Yum China said it was confident in
China's long-term market potential.
Some restaurant operators have temporarily closed all their
outlets on the mainland, including Hong Kong-listed Haidilao
International Holding Ltd. and Jiumaojiu International Holdings
Ltd, which both closed their doors on Jan. 26.
Haidilao runs a chain of hot pot restaurants, where diners
prepare their own dishes by dunking meat and vegetables into
bubbling cauldrons of spicy soup, while recently listed Jiumaojiu
is best known for pickled fish dishes.
Walter Woo, a consumer analyst at CMB International Securities
Ltd., said disruptions over the typically busy new year break would
have a disproportionately large impact on restaurants' full-year
profits. In some cases, he said landlords might help by offering
free rent for a period of time.
Choonshik Yi, head of Asia equities at UBP Asset Management Asia
Ltd., said he remained optimistic about Chinese consumption as
growth could rebound quickly once the coronavirus was brought under
control.
Speaking generally about companies focused on serving Chinese
consumers, he said: "It may sound scary to hear their gloomy
guidance but it's a matter of time for sales to recover."
Write to Joanne Chiu at joanne.chiu@wsj.com
(END) Dow Jones Newswires
February 07, 2020 02:47 ET (07:47 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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