YUMC

The end of the earnings season is always a good time to take a step back and see who shined (and who didn’t). Let’s take a look at how traditional fast food stocks fared in Q2, starting with Yum China (NYSE:YUMC). Traditional fast-food restaurants are renowned for their speed and convenience, boasting menus filled with familiar and budget-friendly items. Their reputations for on-the-go consumption make them favored destinations for individuals and families needing a quick meal. This class of restaurants, however, is fighting the perception that their meals are unhealthy and made with inferior ingredients, a battle that's especially relevant today given the consumers increasing focus on health and wellness. The 12 traditional fast food stocks we track reported a satisfactory Q2. As a group, revenues beat analysts’ consensus estimates by 1.6%. While some traditional fast food stocks have fared somewhat better than others, they have collectively declined. On average, share prices are down 3.9% since the latest earnings results. One of China’s largest restaurant companies, Yum China (NYSE:YUMC) is an independent entity spun off from Yum! Brands in 2016. Yum China reported revenues of $3.14 billion, up 12.6% year on year. This print exceeded analysts’ expectations by 4.2%. Overall, it was a very strong quarter for the company with an impressive beat of analysts’ EBITDA estimates and a beat of analysts’ EPS estimates. Total system sales grew 6% year over year ("YoY"), excluding foreign currency translation ("F/X"). The market was likely pricing in the results, and the stock is flat since reporting. It currently trades at $45.71. Is now the time to buy Yum China? Access our full analysis of the earnings results here, it’s free. Started by three friends in Seattle’s historic Pike Place Market, Starbucks (NASDAQ:SBUX) is a globally-renowned coffeehouse chain that offers a wide selection of high-quality coffee, beverages, and food items. Starbucks reported revenues of $9.32 billion, down 1.4% year on year, outperforming analysts’ expectations by 1.5%. The business had an exceptional quarter with a solid beat of analysts’ same-store sales estimates and full-year EPS guidance exceeding analysts’ expectations. The market seems content with the results as the stock is up 1.8% since reporting. It currently trades at $106. Is now the time to buy Starbucks? Access our full analysis of the earnings results here, it’s free. Founded by the eclectic John “Papa John” Schnatter, Papa John’s (NASDAQ:PZZA) is a globally recognized pizza delivery and carryout chain known for “better ingredients” and “better pizza”. Papa John's reported revenues of $482.4 million, down 8.8% year on year, in line with analysts’ expectations. It was a softer quarter as it posted full-year EBITDA guidance missing analysts’ expectations significantly and a significant miss of analysts’ EBITDA estimates. As expected, the stock is down 23.5% since the results and currently trades at $22.77. Read our full analysis of Papa John’s results here. Started in 1992 by two brothers as a single pushcart, Dutch Bros (NYSE:BROS) is a dynamic coffee chain that’s captured the hearts of coffee enthusiasts across the United States. Dutch Bros reported revenues of $550.9 million, up 32.5% year on year. This print surpassed analysts’ expectations by 4.7%. Overall, it was a very strong quarter as it also put up an impressive beat of analysts’ EBITDA estimates and full-year EBITDA guidance beating analysts’ expectations. Dutch Bros achieved the fastest revenue growth in the group. The stock is down 29.4% since reporting and currently trades at $46.39. Read our full, actionable report on Dutch Bros here, it’s free. Famous for its Original Glazed doughnuts and parent company of Insomnia Cookies, Krispy Kreme (NASDAQ:DNUT) is one of the most beloved and well-known fast-food chains in the world. Krispy Kreme reported revenues of $331 million, down 12.8% year on year. This number beat analysts’ expectations by 9.4%. Zooming out, it was a satisfactory quarter as it also recorded an impressive beat of analysts’ EBITDA estimates but EPS in line with analysts’ estimates. Krispy Kreme delivered the biggest analyst estimate beat but had the slowest revenue growth among its peers. The stock is up 8.7% since reporting and currently trades at $3.37. Read our full, actionable report on Krispy Kreme here, it’s free. Over the past year, investors have been forced to repeatedly answer the same question: what is the market’s biggest risk? The answer has changed several times, and each shift has reshaped market leadership. Late in 2025 and early 2026, artificial intelligence became the market’s primary uncertainty. Investors questioned whether AI would erode software pricing power and weaken competitive moats as AI made it easier to replicate once-differentiated products. By the spring, technology took a back seat to geopolitics. The U.S. conflict with Iran briefly became the market’s dominant narrative, raising concerns about oil prices, inflation, and global growth. But as energy markets remained orderly and fears of a prolonged supply disruption faded, investors quickly turned their focus back to fundamentals. Want to invest in winners with rock-solid fundamentals? Check out our Top 5 Quality Compounder Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.

Yum China Holdings reported its second-quarter 2026 results, with revenue rising to US$3,138 million and net income to US$244 million, while also affirming a US$0.29 per-share dividend and detailing progress on a multi-year US$4.76 billion share repurchase program. The company’s continued earnings growth, combined with ongoing dividends and sizeable buybacks, highlights a focus on both expansion and returning capital to shareholders. We’ll now consider how Yum China’s earnings beat and continued capital returns program influence the earlier investment narrative for the stock. Find 55 companies with promising cash flow potential yet trading below their fair value. To own Yum China, you have to believe its scale, store expansion and digital ecosystem can offset rising competition and cost pressures in China’s quick-service market. The latest earnings beat and capital returns support that thesis in the near term, while the most important catalyst remains profitable store growth and digital engagement, and the biggest immediate risk is margin pressure from delivery and labor costs. This quarter’s results do not appear to change those priorities in a material way. Among the latest announcements, the completion of US$4,760.14 million of share repurchases (28.22% of shares under the 2017 plan) stands out alongside the affirmed US$0.29 dividend. For investors focused on the expansion and digital catalysts, these capital returns underline that Yum China is pairing rapid unit growth with ongoing buybacks and cash distributions, which may be particularly relevant given its recent earnings surprise and continued investment in delivery and technology. But investors should also be aware that rising rider and labor costs could pressure margins just as Yum China leans further into delivery and... Read the full narrative on Yum China Holdings (it's free!) Yum China Holdings' narrative projects $14.7 billion revenue and $1.3 billion earnings by 2029. This requires 6.6% yearly revenue growth and about a $354 million earnings increase from $946.0 million today. Uncover how Yum China Holdings' forecasts yield a $61.22 fair value, a 27% upside to its current price. Seven members of the Simply Wall St Community value Yum China between US$43.54 and US$66.22 per share, showing wide disagreement on upside potential. Against that backdrop, the recent earnings beat and continued capital returns highlight how differently people weigh growth catalysts versus persistent cost and competition risks, so it is worth comparing several of these views yourself. Explore 7 other fair value estimates on Yum China Holdings - why the stock might be worth as much as 37% more than the current price! Disagree with existing narratives? Extraordinary investment returns rarely come from following the herd, so go with your instincts. A great starting point for your Yum China Holdings research is our analysis highlighting 5 key rewards and 1 important warning sign that could impact your investment decision. Our free Yum China Holdings research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Yum China Holdings' overall financial health at a glance. Don't miss your shot at the next 10-bagger. Our latest stock picks just dropped: Uncover the next big thing with 21 elite penny stocks that balance risk and reward. We've uncovered the 9 dividend fortresses yielding 5%+ that don't just survive market storms, but thrive in them. Invest in the nuclear renaissance through our list of 88 elite nuclear energy infrastructure plays powering the global AI revolution. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include YUMC. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Interested in Yum China? Here are five stocks we like better. Yum China delivered broad-based Q2 growth: Revenue rose 13%, system sales increased 6% excluding foreign exchange, and same-store sales grew 1%. Operating profit reached a record $348 million, while diluted EPS climbed 14% to $0.70. KFC and Pizza Hut gained momentum through new formats: KFC’s KCOFFEE and KPRO modules expanded rapidly and lifted parent-store sales, while Pizza Hut returned to same-store sales growth and raised its annual new-store target to more than 800 starting in 2027. The Pizza Hut acquisition is expected to strengthen margins and earnings: The deal is expected to close in August, reduce licensing costs and be slightly EPS-accretive in 2026, with mid-single-digit accretion anticipated in 2027–2028. Yum China also reiterated its 2026 growth targets and plans to return $1.5 billion to shareholders. Yum China (NYSE:YUMC) reported second-quarter growth in sales, operating profit and earnings, extending what Chief Executive Officer Joey Wat described as the company’s ninth consecutive quarter of simultaneous system sales growth, operating profit growth and operating-margin expansion. Revenue increased 13% in the quarter, while system sales rose 6% excluding foreign-exchange effects. Same-store sales grew 1%, improving from the first quarter, supported by a 14th consecutive quarter of same-store transaction growth. The company opened 560 net new stores during the quarter and about 1,209 new stores in the first half, roughly double the pace of the prior-year period. → Microsoft Just Flipped the AI Spending Narrative Overnight Chief Financial Officer Adrian Ding said operating profit reached a second-quarter record of $348 million, up 7% year over year. Net income rose 6% to $244 million, while diluted earnings per share increased 14% to $0.70. Excluding the impact of Yum China’s investment in Meituan, diluted EPS increased 10%. KFC system sales increased 7% year over year in the second quarter, accelerating from 5% growth in the first quarter. Same-store sales rose 1%, with a 4% gain in transactions more than offsetting a 3% decline in average ticket. The average ticket was CNY36, reflecting more small orders from new customer segments and locations including KCOFFEE Cafe and KPRO. → 2 Unique Space ETFs That Could Upend the Industry Despite higher delivery-related rider costs, KFC’s restaurant margin expanded 20 basis points to 17.1%, while its operating margin also increased 20 basis points. Ding said delivery sales represented 54% of Yum China’s sales in the quarter, compared with 45% a year earlier, and rider costs reduced margin by 140 basis points. The company continued to expand KFC’s side-by-side formats. KCOFFEE Cafe exceeded 3,300 locations and remains on track to reach 5,000 locations by the end of 2027. KPRO, the company’s light-meal concept, expanded to more than 450 locations. Yum China now expects KPRO to reach about 800 locations by year-end, above an earlier target of 600. → MarketBeat Week in Review – 07/27- 07/31 Ding said KCOFFEE Cafe generated a mid-single-digit sales uplift for parent stores, while KPRO generated about a 20% uplift. Capital expenditures for both modules have fallen by about half compared with earlier modules last year, he said. Wat said KCOFFEE Cafe generated about CNY1 billion in sales last year and is targeted to approach CNY2 billion this year. KPRO is expected to quadruple sales this year and exceed CNY1 billion in sales next year. More than 80% of KPRO sales have come from KFC members, according to Wat. Pizza Hut system sales rose 6% in the second quarter, following 4% growth in the first quarter. Same-store sales returned to growth at 1%, as a 13% increase in transactions offset an 11% decline in average ticket. The average ticket declined to CNY68, moving closer to Yum China’s CNY60 to CNY70 target range under its mass-market strategy. Pizza Hut opened 381 net new stores in the first half, nearly matching its total openings for all of 2025. The company said it is preparing to become the owner of the Pizza Hut brand in mainland China after operating the brand for 36 years. Wat said ownership is expected to save license fees, improve store economics and provide greater flexibility to pursue new products, formats and expansion plans. Yum China now expects Pizza Hut net new openings to exceed 800 annually in 2027 and 2028, compared with its prior target of more than 600. The company’s Pizza Hut Burger Bar had expanded to more than 200 locations within six months. Wat said the format has delivered double-digit incremental sales and meaningful profit to parent stores. Yum China plans to expand Burger Bar to 500 to 600 locations by the end of 2026, representing roughly 10% of Pizza Hut’s nearly 5,000-store portfolio. Pizza Hut restaurant margin declined 40 basis points in the second quarter, primarily due to a larger delivery mix, value-oriented offerings and expenses related to launching Burger Bar. However, operating margin expanded 60 basis points, aided by lower closure and impairment expenses. Ding said the company expects greater year-over-year improvement in Pizza Hut restaurant margin in the second half as efficiency improves and rider-cost pressure moderates. The Pizza Hut transaction is expected to close in August and will initially be funded primarily through an approximately $1.2 billion-equivalent bridge loan of up to 12 months. Ding said the bridge loan’s interest rate is expected to be about 2%, while longer-term financing options, including syndicated loans, bonds and convertible bonds, remain under consideration. Yum China expects savings from the 3% license payments to Yum! Brands to add 2.8% to Pizza Hut restaurant operating margins after value-added tax, or about 60 basis points for Yum China overall. The company expects the transaction to add 30 to 40 basis points to restaurant and operating margins in the third quarter and 20 to 30 basis points for the full year. Management expects the deal to be slightly accretive to diluted EPS in 2026 and mid-single-digit accretive in 2027 and 2028, after accounting for transaction costs, financing interest and taxes. For 2026, Yum China reiterated its targets for a same-store sales index of 100 to 102, mid- to high-single-digit system sales growth, high-single-digit operating profit growth, double-digit EPS growth, and slight improvements in restaurant and operating margins. The company also remains on track to reach 20,000 stores by year-end. Yum China returned $780 million to shareholders in the first half, including $515 million through share repurchases and $203 million in cash dividends. The company continues to target $1.5 billion in shareholder returns during 2026. Yum China Holdings, Inc operates as the largest quick-service restaurant company in China, through its ownership and franchising of brands such as KFC, Pizza Hut and Taco Bell. The company's core business encompasses full-service and fast‐casual dining, takeout and delivery channels, as well as ancillary services including loyalty programs and digital ordering platforms. Yum China's restaurants offer a diverse menu that adapts global brand concepts to local consumer preferences, featuring items such as soy‐marinated chicken, customized pizzas and region‐inspired side dishes. In addition to its signature brands, Yum China has expanded its portfolio to include innovative concepts tailored to evolving market trends, such as plant‐based offerings, self‐service kiosks and mobile app integrations. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Yum China Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

Yum China Holdings YUMC offers investors a mixed but potentially attractive setup after its second-quarter 2026 earnings beat, better profitability and continued store expansion.The question is whether earnings momentum and a lower valuation are enough to offset limited upside to the six-to-12-month $49 price target, delivery-cost pressure and risks tied to consumer demand in China. YUMC traded at 14.55X forward 12-month earnings, below the restaurant sub-industry at 22.96X, the broader Zacks Retail-Wholesale sector at 22.52X and the S&P 500 at 20.1X. Yum China price-consensus-chart | Yum China Quote That discount is notable against the stock’s own history. The current multiple sits below its five-year median of 19.35X but above the five-year low of 12.52X, suggesting the valuation is cheaper than normal without being deeply distressed. Adjusted earnings per share were 70 cents, up 21% year over year and above the Zacks Consensus Estimate of 69 cents. Revenues rose 13% to $3.14 billion and topped the consensus mark of $3.06 billion.Operating profit increased 14% to a second-quarter record of $348 million. Operating margin widened 20 basis points to 11.1%, marking the ninth consecutive quarter of expansion. Yum China’s investment case also rests on a larger store base. The company plans more than 1,900 net new store openings in 2026 and expects its total count to exceed 20,000 units during the year.Franchisees are expected to account for 40-50% of net new openings at both KFC and Pizza Hut. That mix can bring local capital and resources into lower-tier cities and remote markets, although franchise locations represented only 18% of total stores at the end of the second quarter. Cash generation adds another layer to the investment case. Net cash provided by operating activities reached $976 million in the first half of 2026, up from $864 million in the prior-year period.Yum China plans to return $1.5 billion to shareholders in 2026. It returned $718 million in the first half and intends to distribute 100% of annual free cash flow after minority dividend payments beginning in 2027. The valuation case is not open-ended. The $49 price target implies only modest upside from the $46.47 share price cited as of July 30, 2026.Risks remain visible. KFC’s average ticket fell 3% in the second quarter, while Pizza Hut’s declined 11%. Delivery represented about 54% of company sales, lifting rider-cost pressure, while uneven Chinese consumer spending and intense competition continue to limit pricing power.The planned acquisition of the Pizza Hut brand in Mainland China adds another financial consideration. Yum China expects to fund the deal primarily through a $1.2 billion offshore bridge loan with a term of up to 12 months. YUMC has a constructive near-term profile, but the stock still depends on execution. Earnings growth, margin expansion, lower valuation and capital returns are positives, while the modest price-target gap and delivery economics keep the setup balanced.The stock currently carries a Zacks Rank #2 (Buy). It also has a VGM Score of A, with a Value Score of B, Growth Score of B and Momentum Score of B. That mix points to favorable near-term investment characteristics across valuation, growth and price trends. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Restaurant peers such as Chipotle Mexican Grill CMG and Darden Restaurants DRI offer useful context for investors comparing traffic, pricing and margin execution across the industry. Against that backdrop, Yum China’s longer-term appeal depends on sustaining transactions, protecting margins and keeping earnings estimates supportive. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Yum China (YUMC) : Free Stock Analysis Report Chipotle Mexican Grill, Inc. (CMG) : Free Stock Analysis Report Darden Restaurants, Inc. (DRI) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Yum China Holdings YUMC gave investors a clean read on its second-quarter 2026 growth engine. Revenues rose 13% year over year, adjusted earnings per share increased 21% and operating profit rose 14% to $348 million.The question now is whether transaction gains, rapid unit development and brand innovation can keep momentum intact while value pricing, smaller tickets and rising delivery costs pressure store-level economics. KFC and Pizza Hut both contributed to the quarterly beat. KFC system sales increased 7%, while Pizza Hut system sales rose 6%, with both brands generating 1% same-store sales growth. Yum China price-consensus-chart | Yum China Quote KFC remains the company’s main earnings engine, with second-quarter revenues of $2.34 billion and operating profit of $332 million. Pizza Hut is building a broader mass-market platform through value offerings, new formats and product extensions that widened traffic appeal. Yum China recorded its 14th consecutive quarter of same-store transaction growth, a useful signal in a market where consumers remain price-sensitive. Companywide same-store transactions rose 5%, helping offset lower average tickets.At KFC, same-store transactions increased 4% while average ticket declined 3%. Pizza Hut showed a more pronounced trade-off, with transactions up 13% and ticket down 11%, showing how traffic gains compensated for smaller average orders. Unit growth remains central to the investment case. Yum China opened 560 net new stores in the second quarter and 1,196 in the first half of 2026, lifting its total footprint to 19,297 locations as of June 30.Flexible formats, lower average capital requirements and broader franchise participation are supporting expansion. Franchisees accounted for 41% of second-quarter openings, and management remains on track to exceed 20,000 stores in 2026 while targeting more than 30,000 by 2030. Yum China is also using side-by-side concepts to stretch existing brands into more dayparts and occasions. KCOFFEE Cafe has reached more than 3,300 locations and generated a mid-single-digit sales uplift at parent KFC stores.KPRO exceeded 450 locations and delivered an approximately 20% uplift, supporting demand for lighter meals and new consumption occasions. Pizza Hut Burger Bar, now in more than 200 locations, is designed to capture burger and solo-dining demand while adding incremental sales to parent restaurants. Delivery sales increased 26% in the quarter and represented about 54% of company sales, up from 45% a year earlier. That mix brings convenience and reach, but rider expenses reduced restaurant margin by about 140 basis points.Yum China offset most of that pressure through streamlined operations, labor productivity and lower occupancy expenses. Operating margin expanded 20 basis points to 11.1%, marking the ninth straight quarter of expansion, while restaurant margin held flat at 16.1%. The bottom line is that Yum China’s second-quarter results showed traffic-led growth, disciplined expansion and brand extensions working at the same time. The long-term thesis still depends on whether traffic can keep offsetting ticket compression and whether delivery economics can remain manageable.YUMC currently carries a Zacks Rank #2 (Buy). The stock also has a VGM Score of A, along with a Value Score of B, Growth Score of B and Momentum Score of B, a combination that points to favorable traits across valuation, earnings growth and price trend measures. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Restaurant investors can also compare Yum China with Yum! Brands YUM, the global operator of KFC, Pizza Hut, Taco Bell and Habit Burger & Grill, and Darden Restaurants DRI, a full-service dining operator with brands such as Olive Garden and LongHorn Steakhouse. YUMC’s case is more directly tied to China traffic recovery, store density and delivery execution, making those operating metrics critical to watch after the earnings beat. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Yum China (YUMC) : Free Stock Analysis Report Yum! Brands, Inc. (YUM) : Free Stock Analysis Report Darden Restaurants, Inc. (DRI) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Yum China Holdings (YUMC) came out with quarterly earnings of $0.7 per share, beating the Zacks Consensus Estimate of $0.69 per share. This compares to earnings of $0.58 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +1.45%. A quarter ago, it was expected that this restaurant operator in China would post earnings of $0.87 per share when it actually produced earnings of $0.87, delivering no surprise. Over the last four quarters, the company has surpassed consensus EPS estimates two times. Yum China, which belongs to the Zacks Retail - Restaurants industry, posted revenues of $3.14 billion for the quarter ended June 2026, surpassing the Zacks Consensus Estimate by 2.65%. This compares to year-ago revenues of $2.79 billion. The company has topped consensus revenue estimates four times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Yum China shares have lost about 4% since the beginning of the year versus the S&P 500's gain of 6.9%. While Yum China has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Yum China was favorable. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #2 (Buy) for the stock. So, the shares are expected to outperform the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.91 on $3.49 billion in revenues for the coming quarter and $2.94 on $12.9 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Retail - Restaurants is currently in the bottom 24% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. One other stock from the same industry, Dine Brands (DIN), is yet to report results for the quarter ended June 2026. The results are expected to be released on August 5. This parent company of Applebee's and IHOP restaurants is expected to post quarterly earnings of $1.04 per share in its upcoming report, which represents a year-over-year change of -11.1%. The consensus EPS estimate for the quarter has been revised 22.6% lower over the last 30 days to the current level. Dine Brands' revenues are expected to be $240.88 million, up 4.4% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Yum China (YUMC) : Free Stock Analysis Report DINE BRANDS GLOBAL, INC. (DIN) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

This article first appeared on GuruFocus. Revenue: Grew 13% year over year in Q2 2026. Operating Profit: Increased 14% year over year to a second-quarter record of $348 million. Diluted EPS: Rose 21% year over year to $0.70, or up 14% excluding foreign exchange impact. System Sales Growth: Increased 6% year over year (excluding foreign exchange), up from 4% in Q1. Same-Store Sales Growth: Improved sequentially to 1% in Q2. Same-Store Transaction Growth: Achieved the 14th consecutive quarter of growth. Restaurant Margin: Was 16.1%, in line with the prior-year level. Operating Profit (OP) Margin: Expanded 20 basis points year over year to 11.1%. Net Income: Was $244 million, up 6% year over year. Net New Store Openings: Opened 560 net new stores in Q2 and approximately 1,200 in the first half of 2026. KFC System Sales Growth: Grew 7% year over year in Q2. KFC Same-Store Sales Growth: Grew 1% in Q2. KFC Restaurant Margin: Expanded 20 basis points to 17.1% in Q2. Pizza Hut System Sales Growth: Grew 6% year over year in Q2. Pizza Hut Same-Store Sales Growth: Returned to positive at 1% in Q2. Pizza Hut Same-Store Transaction Growth: Grew strongly by 13% in Q2. Pizza Hut Restaurant Margin: Decreased 40 basis points in Q2. Delivery Sales Mix: Rose from 45% last year to 54% in Q2 2026. Capital Returns: Returned $718 million to shareholders in the first half of 2026, including $515 million in share repurchases and $203 million in dividends. Warning! GuruFocus has detected 2 Warning Signs with ADX:ADIB. Is YUMC fairly valued? Test your thesis with our free DCF calculator. Release Date: July 30, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Yum China Holdings Inc (NYSE:YUMC) delivered strong Q2 results with revenue up 13%, operating profit up 14%, and diluted EPS up 21% year-over-year, marking the ninth consecutive quarter of simultaneous system sales growth, operating profit growth, and OP margin expansion. Same-store sales growth improved sequentially to 1%, driven by the 14th consecutive quarter of same-store transaction growth, and system sales grew 6% excluding foreign exchange, outperforming the catering industry. Pizza Hut returned to positive same-store sales growth at 1%, with new store openings nearly doubling year-over-year, and the company plans to accelerate Pizza Hut net new store openings to over 800 per year in 2027 and 2028, up from the original target of over 600. Innovative side-by-side modules like KCOFFEE Cafe (over 3,300 locations), KPRO (expanding to 800 locations), and Pizza Hut Burger Bar (targeting 500-600 locations by end of 2026) are driving incremental sales and profit, with KCOFFEE Cafe targeting nearly RMB2 billion in sales in 2026. The acquisition of the Pizza Hut brand in Mainland China is expected to save 3% in license fees, adding 2.8% to Pizza Hut's restaurant margins, and is projected to be slightly accretive to diluted EPS in 2026 and mid-single-digit accretive in 2027 and 2028. Delivery sales mix increased significantly from 45% to 54% year-over-year, causing a 140 basis point margin impact from rider costs, which pressured restaurant margins despite operational efficiencies. Pizza Hut's restaurant margin declined 40 basis points in Q2 due to higher delivery mix costs, better value-for-money offerings, and expenses related to the Pizza Hut Burger Bar launch. Ticket average decreased 3% at KFC and 11% at Pizza Hut, driven by incremental smaller orders from new customer segments and locations, reflecting a shift toward lower-priced items. The company faces tougher sales comparisons in the second half of 2026 due to lapping a higher delivery sales base from last year, which could challenge same-store sales growth. Interest income was lower by $13 million in Q2 due to a reduced cash balance from shareholder returns and lower interest rates, and the company expects to borrow a $1.2 billion bridge loan for the Pizza Hut deal, which will incur financing costs. Here are the key highlights from the Yum China Holdings Inc (NYSE:YUMC) Q2 2026 earnings call. Q: Can you share your observations on the overall consumption trend and the risk of re-emerging pricing or promotional activities in the market? A: (Joey Wat, CEO) We are encouraged by the rebound in June retail sales. July tracked broadly in line with expectations, despite some temporary extreme weather. Consumers are still willing to spend on innovative products and experiences that offer strong value. We see some stabilization in pricing trends, with more players willing to take pricing, and competition between delivery platforms has become more rational. We are working hard to maintain positive same-store sales growth in Q3. Q: Regarding the Pizza Hut brand acquisition, what are your future refinancing plans, and specifically, what are your thoughts on using a convertible bond (CB) and its potential dilutive impact? A: (Adrian Ding, CFO) We will use a $1.2 billion bridge loan (approx. 2% interest) to close the deal in August. For long-term refinancing, all options are on the table, including syndicated loans, bonds, and CBs. If we choose a CB, we can minimize dilution through mechanisms like a capped call option (raising the conversion premium to 70-80%) and net share settlement, meaning dilution would only occur if the share price is significantly higher. Q: For Pizza Hut, does the expected second-half margin improvement include the accretion from the brand acquisition, and how do you balance the accelerated store expansion pace with maintaining positive same-store sales? A: (Adrian Ding, CFO) The margin improvement guidance for the second half excludes the Pizza Hut deal and is driven by a moderation of rider cost pressure. On store expansion, we balance comp sales, store openings, and margins. We see significant untapped opportunities in lower-tier cities and strategic channels (hospitals, universities) where sales transfer from new stores is limited, allowing us to accelerate openings without unduly pressuring comps. Q: With the Pizza Hut Burger Bar gaining momentum, how do you prevent cannibalization with existing Pizza Hut products and KFC, and where is the market share coming from? A: (Joey Wat, CEO) The burger market is growing nicely. Our product is very unique, with buns baked fresh in-store and patties cooked to order. We are likely competing with beef-burger-focused brands, not KFC, as KFC's beef burger share is mid-single digits. We see incremental sales (double-digit to parent stores) because offering a new category provides more choices to customers. The quality and value proposition are driving this new business. Q: What are the biggest changes you will bring to the Pizza Hut business after acquiring the brand, and what were the key challenges during the revitalization? A: (Joey Wat, CEO) The transformation has been fundamental, building core capabilities in dough and menu innovation. The key benefit of brand ownership is strategic independence and speed. For example, launching the Pizza Hut Burger Bar required extensive communication with Yum Brands. Owning the brand allows us to react faster and sharper to market changes. Additionally, the 2.8% savings on license fees will improve store economics, enabling more new stores to meet our payback requirements, which is why we raised our 2027-2028 opening target to over 800 per year. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

For the quarter ended June 2026, Yum China Holdings (YUMC) reported revenue of $3.14 billion, up 12.6% over the same period last year. EPS came in at $0.70, compared to $0.58 in the year-ago quarter. The reported revenue compares to the Zacks Consensus Estimate of $3.06 billion, representing a surprise of +2.65%. The company delivered an EPS surprise of +1.45%, with the consensus EPS estimate being $0.69. While investors closely watch year-over-year changes in headline numbers -- revenue and earnings -- and how they compare to Wall Street expectations to determine their next course of action, some key metrics always provide a better insight into a company's underlying performance. As these metrics influence top- and bottom-line performance, comparing them to the year-ago numbers and what analysts estimated helps investors project a stock's price performance more accurately. Here is how Yum China performed in the just reported quarter in terms of the metrics most widely monitored and projected by Wall Street analysts: No of Restaurants - Total: 19,297 versus 19,128 estimated by three analysts on average. No of Restaurants - Others: 959 compared to the 898 average estimate based on three analysts. No of Restaurants - Pizza Hut: 4,549 versus the three-analyst average estimate of 4,494. No of Restaurants - KFC: 13,789 compared to the 13,737 average estimate based on three analysts. Revenues- Franchise fees and income: $29 million compared to the $29.78 million average estimate based on four analysts. The reported number represents a change of +20.8% year over year. Revenues- Company sales: $2.91 billion compared to the $2.86 billion average estimate based on four analysts. The reported number represents a change of +11.4% year over year. Revenues- Revenues from transactions with franchisees: $155 million versus the four-analyst average estimate of $131.87 million. The reported number represents a year-over-year change of +34.8%. Revenues- Other revenues: $44 million versus the four-analyst average estimate of $37.26 million. The reported number represents a year-over-year change of +25.7%. Revenues- KFC- Company sales: $2.29 billion versus the three-analyst average estimate of $2.24 billion. The reported number represents a year-over-year change of +11.4%. Revenues- Pizza Hut: $613 million compared to the $606.39 million average estimate based on three analysts. The reported number represents a change of +10.7% year over year. Revenues- Pizza Hut- Other revenues: $3 million versus the three-analyst average estimate of $6.33 million. The reported number represents a year-over-year change of -50%. Revenues- Pizza Hut- Revenues from transactions with franchisees: $3 million versus $1.86 million estimated by three analysts on average. Compared to the year-ago quarter, this number represents a +200% change. View all Key Company Metrics for Yum China here>>> Shares of Yum China have returned +11.9% over the past month versus the Zacks S&P 500 composite's -1.5% change. The stock currently has a Zacks Rank #2 (Buy), indicating that it could outperform the broader market in the near term. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Yum China (YUMC) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Revenue Increased by 13%; Operating Profit Up 14%; Diluted EPS Grew 21%Same-Store Sales Growth Improved Sequentially to 1%; OP Margin Expanded Year Over Year for the 9th Consecutive QuarterAcquisition of the Pizza Hut Brand in Mainland China Expected to Close in August 2026On Track to Return $1.5 Billion to Shareholders in 2026, ~10% of Current Market Capitalization SHANGHAI, July 30, 2026 /PRNewswire/ -- Yum China Holdings, Inc. (the "Company" or "Yum China") (NYSE: YUMC and HKEX: 9987) today reported unaudited results for the second quarter ended June 30, 2026. Second Quarter Highlights Total system sales grew 6% year over year ("YoY"), excluding foreign currency translation ("F/X"). Same-store sales grew 1% YoY. Same-store transactions grew 5% YoY, the 14th consecutive quarter of growth. Total revenues increased 13% YoY to $3.1 billion, or a 6% increase excluding F/X. Opened 560 net new stores, a second-quarter record high and 67% higher than the openings in the same quarter last year, with 41% opened by franchisees. As of June 30, 2026, total store count reached 19,297, with 18% of stores operated by franchisees. Operating profit grew 14% YoY to $348 million, a second-quarter record high. Core operating profit grew 7% YoY. OP margin was 11.1%, an increase of 20 basis points YoY, the ninth consecutive quarter of OP margin expansion. Restaurant margin was 16.1%, flat YoY, primarily due to increased rider cost from a higher delivery mix, offset by streamlined operations. Diluted EPS increased 21% YoY to $0.70, or up 14% excluding F/X, and up 10% further excluding the impact(1) of the mark-to-market equity investments. Returned $402 million to shareholders through $301 million in share repurchases and $101 million in cash dividends. Delivery sales grew 26% YoY. Delivery contributed approximately 54% of total Company sales, up from 45% in the same quarter last year. Active Members of KFC or Pizza Hut, defined as those who transacted in the past 12 months, exceeded 270 million, representing a 6% YoY increase. CEO Comments Joey Wat, CEO of Yum China, commented, "We delivered strong results in the second quarter. For the ninth consecutive quarter, we simultaneously grew system sales, operating profit and OP margin. While the operating environment remains dynamic, our topline growth continued to outperform the industry in Q2. Same-store sales growth improved sequentially to 1%, led by the 14th consecutive quarter of same-store transaction growth, while store openings continued to accelerate year over year across both company-owned and franchise stores. KFC delivered strong results, with 7% system sales growth and restaurant margin expansion. Pizza Hut's same-store sales returned to positive growth and net new openings nearly doubled from last year." Wat continued, "Our menu innovations and breakthrough side-by-side modules are helping us broaden into new occasions and new customer segments. As we rapidly roll out KCOFFEE cafe, KPRO and car-side pickup services to more KFC locations, Pizza Hut has also built a Pizza Hut Burger Bar to drive incremental sales and profit. At the same time, our KFC Small Town and Pizza Hut WOW models are helping us deepen penetration in lower-tier cities. With our multiple growth drivers, we are confident in our ability to lead the catering industry and deliver on our full-year growth targets, even as we face tougher comparisons in the second half of the year following last year's delivery platform subsidies." Wat concluded, "We are about to reach a major breakthrough by becoming the owner of the Pizza Hut brand in Mainland China, after operating the brand in the market for 36 years. In the near term, we expect the savings in license fees to support margin expansion, with Pizza Hut's restaurant margin approaching KFC's. More potential new stores are expected to meet our payback requirements of two to three years. Over the longer term, brand ownership will give us greater strategic flexibility to capture new opportunities and innovate more nimbly across our menu, store formats, new business modules and operations. We expect this to accelerate Pizza Hut's growth trajectory and generate sustainable long-term value for our shareholders." Capital Returns to Shareholders The Company is on track to return $1.5 billion each year from 2024 to 2026, which is annually around 10% of our market capitalization as of July 29, 2026. In the first half of 2026, the Company returned $718 million in capital to shareholders through $515 million in share repurchases and $203 million in cash dividends. The Board declared a cash dividend of $0.29 per share on Yum China's common stock, payable on September 17, 2026, to shareholders of record as of the close of business on August 27, 2026. Starting in 2027, the Company plans to return approximately 100% of annual free cash flow after subsidiaries' dividend payments to non-controlling interests. This is anticipated to translate into an average annual return of approximately $900 million to over $1 billion in 2027 and 2028, and to exceed $1 billion in 2028. System sales for KFC grew 7% YoY, improving sequentially from 5% in the first quarter. Same-store sales increased 1% YoY, the fifth consecutive quarter of growth. Same-store transactions grew 4% YoY. Ticket average was 3% lower YoY, mainly due to incremental smaller orders from new customer segments and occasions, including KCOFFEE and KPRO. Delivery sales grew 26% YoY, contributing approximately 54% of KFC's Company sales, up from 45% in the same quarter last year. KFC opened 335 net new stores during the quarter, including 152 opened by franchisees, representing 45% of net new store openings. Total store count reached 13,789 as of June 30, 2026, with 17% of stores operated by franchisees. Operating profit increased 14% YoY to $332 million. Core operating profit increased 7% YoY. OP margin was 14.2%, an increase of 20 basis points YoY. Restaurant margin was 17.1%, an increase of 20 basis points YoY, primarily due to streamlined operations and favorable commodity prices, partially offset by the impact of increased rider cost resulting from higher delivery mix and value-for-money offerings. System sales for Pizza Hut grew 6% YoY, improving sequentially from 4% in the first quarter. Same-store sales growth returned to positive at 1%. Same-store transactions grew 13% YoY, marking the 14th consecutive quarter of growth, and more than offset the 11% decline in ticket average. In line with our mass-market strategy, ticket average moved closer to our target range, primarily driven by value-for-money offerings and incremental smaller orders such as those from solo diners. Delivery sales grew 26% YoY, contributing approximately 52% of Pizza Hut's Company sales, up from 43% in the same quarter last year. Pizza Hut opened 174 net new stores during the quarter, nearly double the net openings in the same quarter last year, including 70 opened by franchisees, representing 40% of net new store openings. Total store count reached 4,549 as of June 30, 2026, with 11% of stores operated by franchisees. Operating profit grew 11% YoY to $51 million. Core operating profit increased 5% YoY. OP margin was 8.3%, flat YoY. OP margin expanded by 60 bps YoY in the first half of the year. Restaurant margin was 12.9%, a decrease of 40 basis points YoY, primarily due to the impact of increased costs associated with higher delivery sales mix, value-for-money offerings and investment in Pizza Hut Burger Bar, partially offset by streamlined operations, automation and favorable commodity prices. Restaurant margin increased by 10 basis points YoY in the first half of the year. 2026 Outlook The Company targets: Total stores of over 20,000, or more than 1,900 net new stores. 40-50% franchise mix of net new stores for both KFC and Pizza Hut. Capital expenditures of approximately $600 million to $700 million. $1.5 billion capital return to shareholders. Other Update The Company is on track to close the acquisition of the Pizza Hut brand in Mainland China in August and plans to secure an approximately $1.2 billion equivalent offshore bridge loan to finance the transaction. Note on Non-GAAP Measures Reported GAAP results include items that are excluded from non-GAAP measures. See "Reconciliation of Reported GAAP Results to Non-GAAP Measures" and "Segment Results" within this release for non-GAAP reconciliation details. Conference Call Yum China's management will hold an earnings conference call at 7:00 a.m. U.S. Eastern Time on Thursday, July 30, 2026 (7:00 p.m. Beijing/Hong Kong Time on Thursday, July 30, 2026). A live webcast of the call may be accessed at https://edge.media-server.com/mmc/p/zubr6dix. To join by phone, please register in advance through the link provided below. Upon registering, you will be provided with participant dial-in numbers and a unique access PIN. Pre-registration Link: https://register-conf.media-server.com/register/BI611346d62d61456ca32d90b61aca7523 A replay of the webcast will be available two hours after the event and will remain accessible until July 29, 2027. Earnings release and accompanying slides will be available at the Company's Investor Relations website http://ir.yumchina.com. For important news and information regarding Yum China, including our filings with the U.S. Securities and Exchange Commission and the Hong Kong Stock Exchange, visit Yum China's Investor Relations website at http://ir.yumchina.com. Yum China uses this website as a primary channel for disclosing key information to its investors, some of which may contain material and previously non-public information. Forward-Looking Statements This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements under the section titled "2026 Outlook." We intend all forward-looking statements to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the fact that they do not relate strictly to historical or current facts and by the use of forward-looking words such as "expect," "expectation," "believe," "anticipate," "may," "could," "intend," "belief," "plan," "estimate," "target," "predict," "project," "likely," "will," "continue," "should," "forecast," "outlook," "commit" or similar terminology. These statements are based on current estimates and assumptions made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we believe are appropriate and reasonable under the circumstances, but there can be no assurance that such estimates and assumptions will prove to be correct. Forward-looking statements include, without limitation, statements regarding the future strategies, growth, business plans, investments, store openings, net new stores, franchise mix of net new stores, capital expenditures, capital returns, dividend and share repurchase plans, CAGR for system sales, operating profit and EPS, earnings, performance and returns, anticipated effects of population and macroeconomic trends, execution of the Company's RGM 3.0 strategy, the anticipated effects of our innovation, digital and delivery capabilities and investments on growth and beliefs regarding the long-term drivers of Yum China's business. Forward-looking statements are not guarantees of performance and are inherently subject to known and unknown risks and uncertainties that are difficult to predict and could cause our actual results or events to differ materially from those indicated by those statements. We cannot assure you that any of our expectations, estimates or assumptions will be achieved. The forward-looking statements included in this press release are only made as of the date of this press release, and we disclaim any obligation to publicly update any forward-looking statement to reflect subsequent events or circumstances, except as required by law. Numerous factors could cause our actual results or events to differ materially from those expressed or implied by forward-looking statements, including, without limitation: whether we are able to achieve development goals at the times and in the amounts currently anticipated, if at all, the success of our marketing campaigns and product innovation, our ability to maintain food safety and quality control systems, changes in public health conditions, our ability to control costs and expenses, including tax costs, as well as changes in political, economic, trade relations, regulatory conditions in China and the U.S., and those set forth under the caption "Risk Factors" in our most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q. Our plan of capital returns to shareholders is based on current expectations, which may change based on market conditions, capital needs or otherwise. In addition, other risks and uncertainties not presently known to us or that we currently believe to be immaterial could affect the accuracy of any such forward-looking statements. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. You should consult our filings with the Securities and Exchange Commission (including the information set forth under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q) for additional detail about factors that could affect our financial and other results. About Yum China Holdings, Inc. Yum China is the largest restaurant company in China with a mission to make every life taste beautiful. The Company operates over 19,000 restaurants under six brands across over 2,700 cities in China. KFC and Pizza Hut are the leading brands in the quick-service and casual dining restaurant spaces in China, respectively. In addition, Yum China has partnered with Lavazza to develop the Lavazza coffee concept in China. Little Sheep and Huang Ji Huang specialize in Chinese cuisine. Taco Bell offers innovative Mexican-inspired food. Yum China has a world-class, digitalized supply chain, which includes an extensive network of logistics centers nationwide and an in-house supply chain management system. Its strong digital capabilities and loyalty program enable the Company to reach customers faster and serve them better. Yum China is a Fortune 500 company with the vision to be the world's most innovative pioneer in the restaurant industry. For more information, please visit http://ir.yumchina.com. Contacts 6/30/2025B/(W)RevenuesCompany sales$ 2,294$ 2,05911$ 4,704$ 4,26710Franchise fees and income241923474020Revenues from transactions with franchisees191718383316Other revenues11(5)22(4)Total revenues2,3382,096124,7914,34210Costs and Expenses, NetCompany restaurantsFood and paper710631(12)1,4561,316(11)Payroll and employee benefits630556(13)1,2731,110(15)Occupancy and other operating expenses563523(8)1,1231,055(6)Company restaurant expenses1,9031,710(11)3,8523,481(11)General and administrative expenses6761(9)128120(6)Franchise expenses109(22)2119(18)Expenses for transactions with franchisees1515(3)3029(4)Other operating costs and expenses11531258Closures and impairment expenses, net108(30)101327Total costs and expenses, net2,0061,804(11)4,0423,664(10)Operating Profit$ 332$ 29214$ 749$ 67810OP margin14.2 %14.0 %0.2ppts.15.6 %15.6 %—ppts.Company sales100.0 %100.0 %100.0 %100.0 %Food and paper30.930.7(0.2)ppts.31.030.9(0.1)ppts.Payroll and employee benefits27.527.0(0.5)ppts.27.126.0(1.1)ppts.Occupancy and other operating expenses24.525.40.9ppts.23.824.70.9ppts.Restaurant margin17.1 %16.9 %0.2ppts.18.1 %18.4 %(0.3)ppts.Percentages may not recompute due to rounding. In this press release: Certain performance metrics and non-GAAP measures are presented excluding the impact of foreign currency translation ("F/X"). These amounts are derived by translating current year results at prior year average exchange rates. We believe the elimination of the F/X impact provides better year-to-year comparability without the distortion of foreign currency fluctuations. System sales growth reflects the results of all restaurants regardless of ownership, including Company-owned and franchise restaurants that operate our restaurant concepts, except for non-Company-owned restaurants for which we do not receive a sales-based royalty. Sales of franchise restaurants typically generate ongoing franchise fees for the Company at an average rate of approximately 6% of system sales. Franchise restaurant sales are not included in Company sales in the Condensed Consolidated Statements of Income; however, the franchise fees are included in the Company's revenues. We believe system sales growth is useful to investors as a significant indicator of the overall strength of our business as it incorporates all of our revenue drivers, Company and franchise same-store sales as well as net unit growth. Effective January 1, 2018, the Company revised its definition of same-store sales growth to represent the estimated percentage change in sales of food of all restaurants in the Company system that have been open prior to the first day of our prior fiscal year, excluding the period during which stores are temporarily closed. We refer to these as our "base" stores. Previously, same-store sales growth represented the estimated percentage change in sales of all restaurants in the Company system that have been open for one year or more, including stores temporarily closed, and the base stores changed on a rolling basis from month to month. This revision was made to align with how management measures performance internally and focuses on trends of a more stable base of stores. Reconciliation of Reported GAAP Results to Non-GAAP Measures(in millions, except per share data)(unaudited) In addition to the results provided in accordance with U.S. Generally Accepted Accounting Principles ("GAAP") in this press release, the Company provides the following non-GAAP measures: Measures adjusted for Special Items, which include Adjusted Operating Profit, Adjusted Net Income, Adjusted Earnings Per Common Share ("EPS"), Adjusted Effective Tax Rate and Adjusted EBITDA; Company Restaurant Profit ("Restaurant profit") and Restaurant margin; Core Operating Profit and Core OP margin, which exclude Special Items, and further adjusted for Items Affecting Comparability and the impact of F/X; These non-GAAP measures are not intended to replace the presentation of our financial results in accordance with GAAP. Rather, the Company believes that the presentation of these non-GAAP measures provides additional information to investors to facilitate the comparison of past and present results, excluding those items that the Company does not believe are indicative of our core operations. With respect to non-GAAP measures adjusted for Special Items, the Company excludes impact from Special Items for the purpose of evaluating performance internally and uses them as factors in determining compensation for certain employees. Special Items are not included in any of our segment results. Adjusted EBITDA is defined as net income including noncontrolling interests adjusted for equity in net earnings (losses) from equity method investments, income tax, interest income, net, investment gain or loss, depreciation and amortization, store impairment charges, and Special Items. Store impairment charges included as an adjustment item in Adjusted EBITDA primarily resulted from our semi-annual impairment evaluation of long-lived assets of individual restaurants, and additional impairment evaluation whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. If these restaurant-level assets were not impaired, depreciation of the assets would have been recorded and included in EBITDA. Therefore, store impairment charges were a non-cash item similar to depreciation and amortization of our long-lived assets of restaurants. The Company believes that investors and analysts may find it useful in measuring operating performance without regard to such non-cash items. Restaurant Profit is defined as Company sales less expenses incurred directly by our Company-owned restaurants in generating Company sales, including cost of food and paper, restaurant-level payroll and employee benefits, rent, depreciation and amortization of restaurant-level assets, advertising expenses, and other operating expenses. Company restaurant margin percentage is defined as Restaurant profit divided by Company sales. We also use Restaurant profit and Restaurant margin for the purposes of internally evaluating the performance of our Company-owned restaurants and we believe they provide useful information to investors as to the profitability of our Company-owned restaurants. Core Operating Profit is defined as Operating Profit adjusted for Special Items, and further excluding Items Affecting Comparability and the impact of F/X. We consider quantitative and qualitative factors in assessing whether to adjust for the impact of items that may be significant or that could affect an understanding of our ongoing financial and business performance or trends. Items such as charges, gains and accounting changes which are viewed by management as significantly impacting the current period or the comparable period, due to changes in policy or other external factors, or non-cash items pertaining to underlying activities that are different from or unrelated to our core operations, are generally considered "Items Affecting Comparability." Examples of Items Affecting Comparability include, but are not limited to: temporary relief from landlords and government agencies; VAT deductions due to tax policy changes; and amortization of reacquired franchise rights recognized upon acquisitions. We believe presenting Core Operating Profit provides additional information to further enhance comparability of our operating results and we use this measure for purposes of evaluating the performance of our core operations. Core OP margin is defined as Core Operating Profit divided by Total revenues, excluding the impact of F/X. The following tables set forth the reconciliation of the most directly comparable GAAP financial measures to the non-GAAP financial measures. The reconciliation of GAAP Operating Profit to Restaurant Profit and Core Operating Profit by segment is presented in Segment Results within this release. View original content:https://www.prnewswire.com/news-releases/yum-china-reports-second-quarter-2026-results-302838817.html