Pizza Hut and KFC Owner in China warns Coronavirus Hurting Business

Pizza Hut and KFC Owner in China warns Coronavirus Hurting Business

Yum China, which operates KFC, Taco Bell and Pizza Hut in the country, warned that the deadly coronavirus will hurt its business this year.

“As a result of the outbreak, the company may experience operating losses for the first quarter of 2020,” the company said in a statement discussing 2019 financial results.

So far, the company has temporarily closed more than 30 per cent  of its restaurants in China. The firm operates 9,200 restaurants — including about 6,500 KFC locations and roughly 2,300 Pizza Hut stores. The remaining restaurants include Little Sheep, East Dawning and COFFI & JOY, in addition to Taco Bell.

Stores that remained open held shorter hours and brought in fewer customers than usual. Same-store sales at those locations were down 40-50 per cent since the Lunar New Year holiday period compared to the 2019 holiday period. If the trends continue, Yum China could face operating losses for the full year. Pizza Hut locations, where most customers dine-in, were hit especially hard.

Shares of the company dropped about 3 per cent after US trading hours Wednesday on the news.

The coronavirus outbreak, which originated in the Chinese city of Wuhan, has infected more than 28,000 people in over 25 countries. It has killed more than 560 people worldwide, mostly in mainland China.

As the virus continues to spread, global businesses are responding by enhancing health protocols and closing stores. Disney (DIS), which warned that it could take a $280 million hit in part because of the virus, closed its theme parks in Shanghai and Hong Kong. Apple (AAPL) has temporarily closed all 42 of its stores in China “out of an abundance of caution.”

It’s not clear when Yum China (YUMC) will reopen its closed restaurants, or if it will shutter additional locations. But “we are optimistic and committed to the long-term opportunity in China,” CFO Andy Yeung said. He added that while in-restaurant dining has suffered in the wake of the outbreak, “delivery is holding up well.”

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To keep customers and employees safe at operating locations, the company has stepped up the cleaning and disinfecting of equipment and surfaces in stores, and ensured that employees wear masks.

“Our top priority is the safety of our employees and customers,” said CEO Joey Wat. “We are closely monitoring and implementing the requirements of local government and health authorities. Because the situation is fast changing, we are implementing all measures as rapidly as possible.”

Wat said that though restaurants are closed to regular customers in Wuhan, Yum has opened some kitchens to serve meals to health workers. A handful of Yum restaurants in the city are serving more than 1,000 meals per day to doctors and medical staff.

The idea could become a business opportunity, Wat added. “We received a lot of requests in terms of catering services.”

Though its 2020 outlook may be bleak, Yum China delivered strong results last year. Total revenues grew 4 per cent compared to 2018, and same-store sales rose 3% year over year.


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