Live news: Yum China warns hit from Covid lockdowns worse than initial outbreak
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Yum China, owner of the KFC and Pizza Hut brands in the world’s biggest consumer market, has warned that the damage wrought from the latest coronavirus wave is “much more severe” than the initial pandemic outbreak in 2020.
The food retailer, which is listed in Hong Kong and New York and has more than 400,000 staff in China, said it expected an operating loss in the second quarter on declining sales and squeezed profit margins. It comes after cities across China were fully or partially locked down as part of President Xi Jinping’s zero-Covid policy.
“In light of this, we are pulling back on advertising and promotional activities, temporarily postponing store remodels, negotiating rent relief, implementing austerity measures to reduce [expenses], and optimising our raw material cost structure,” the company said.
The company added: “In heavily impacted regions like Shanghai, to serve our community, we have quickly launched community purchasing (a new way of group ordering) across all our brands, promoted new retail packaged food, significantly cut down on menu offerings and shortened operating hours.”
The warning came as worsening consumer sentiment and widespread supply chain disruptions battered the world’s second-biggest economy. Official economic data released on Saturday showed manufacturing and services activity in April at its lowest levels in two years.
In the first quarter, Yum China reported revenues rose 4 per cent year over year in the first quarter to $2.67bn from $2.56bn. But net profit decreased 44 per cent to $191mn from $342mn, and quarterly sales on a same-store basis fell 9 per cent at KFC and 5 per cent at Pizza Hut.
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