Shares of Yum China Holdings Inc. rose. Hours later on Tuesday after the company, which operates KFC and Pizza Hut restaurants in China, said it plans to “significantly accelerate shareholder returns this year, even as other restaurants warn of weak demand in that country.” .
Yum China said its board of directors declared a 23% increase in the cash dividend to 16 cents per share, payable on March 26. It said it plans to buy back $1.25 billion of its shares this year.
Shares jumped 16.2% after hours on Tuesday.
The company announced the investor payouts in its fourth-quarter earnings statement. Total Yum China sales during the quarter rose 19% to $2.49 billion, higher than the FactSet estimate of $2.32 billion. Same-store sales growth of 4% also beat estimates for a 3% gain.
However, adjusted earnings per share of 13 cents were below estimates of 16 cents.
The restaurant operator's results and planned buyback arrive as China's economy goes through a wobbly post-pandemic reopening, deepening concerns about debt and a spiraling property market, in the wake of the collapse of property developer giant Evergrande. But Joey Watt, CEO of Yum China, was optimistic about the company's prospects in a statement on Tuesday.
“Looking to the future, we remain very optimistic about China's tremendous growth opportunities,” Watt said.
“We currently serve only a third of China's population, and our ambitious goal is to expand our reach to half the population by 2026,” he continued. “More than half of our new stores are located in lower-tier cities, strategically located to meet demand from long-term consumption upgrades there.”
Elsewhere, chains such as McDonald's Corp and Starbucks Corp recently said consumers in China have become more reluctant to spend. They pointed out that competitors reduced prices.
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During its earnings call last month, it warned of a “slower-than-expected recovery in China, driven by a more cautious consumer.” However, executives said they were not interested in entering the discount fray, and would instead try to position itself as a “premium” brand there.
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During its own earnings call on Monday, it painted a similar picture of China's economy.
“Certainly in China, as I've read and seen with a number of other companies, consumer sentiment in the country is under a little more pressure right now,” McDonald's CEO Chris Kempczinski said.
“In the fourth quarter in particular, we saw greater promotion of the environment,” he said. “We haven't necessarily followed that, but certainly the environment has become more encouraging, and our focus is on making sure we remain competitive.”
