Yum China Holdings, Inc. (NYSE:YUMC) Q2 2020 Earnings Conference Call - Final Transcript

Jul 29, 2020 • 08:00 pm ET


Yum China Holdings, Inc. (NYSE:YUMC) Q2 2020 Earnings Conference Call - Final Transcript


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Ladies and gentlemen, thank you for standing by, and welcome to the Yum China 2020 Second Quarter Earnings Conference Call. [Operator Instructions]

I will now hand the conference over to your first speaker today. Thank you, and please go ahead, Debbie.

Debbie Ding

Thank you, operator. Hello, everyone, and thank you for joining Yum China's second quarter 2020 earnings conference call. Joining us on today's call are our CEO, Ms. Joey Wat; and our CFO, Mr. Andy Yeung.

Before we get started, I'd like to remind you that our earnings call and investor presentation contains forward-looking statements, which are subject to future events and uncertainties. Our results may differ materially from these forward-looking statements. All forward-looking statements should be considered in conjunction with the cautionary statement in our earnings release and the risk factors included in our filings with the SEC. This call also includes certain non-GAAP financial measures. You should carefully consider the comparable GAAP measures. Reconciliations of the non-GAAP and GAAP measure is included in our earnings release.

Today's call includes three sections: First, Joey will provide an update regarding recent developments, then she will offer some highlights around the quarterly results; Andy will then cover the financial results and provide an update on our full year outlook; finally, we'll open the call to questions. You can find the webcast of this call and a PowerPoint presentation, which contains operational and financial information for the quarter on our IR website.

Now, I would like to turn the call over to Ms. Joey Wat, CEO of Yum China. Joey?

Joey Wat

Thank you, Debbie. Hello, everyone, and thank you for joining us today. I will first update you on COVID developments, and then we'll move on to cover performance in more detail.

Throughout the COVID pandemic, we have been committed to safely providing good food, great value and convenience for our customers wherever they are. Safety is the key word here. At our stores, temperature check, face masks and frequent disinfection and cleaning protocols remain in place. A safe and healthy environment creates confidence for our customers and employees, which helps drive recovery in our business. We approach this challenge with an open mind, with flexibility, speed and courage to try new things. Our nimble marketing, enabled by our digital infrastructure, helped drive improvements at both of our core brands compared to the first quarter.

KFC launched buy-one-get-one weekend in June for the first time for members. Pizza Hut drove traffic with its first-ever all-you-can-eat promotion, featuring steak and baked crayfish. We focus our resources on engaging with our members, targeting specific offers and promotions. Our privilege programs drive frequency, spend and cross sells. However, we are still experiencing significant headwinds. The recovery path is non-linear and uneven.

April and May sales improved sequentially, while June was impacted by delayed school holidays and more stringent social distancing due to resurging regional infection. Our transportation and tourist locations continue to experience significant year-on-year volume declines, which impacts KFC more than Pizza Hut. Around 60 of