The owner of the KFC and Pizza Hut brands in China said on Wednesday the economic damage inflicted by the current Covid-19 surge is worse than that of the initial coronavirus outbreak in 2020.
Yum China expected an operating loss in the second quarter on declining sales and tighter margins.
“The highly transmissible Omicron variant caused significant volatility in our business operations in the first quarter, and continues to have a severe impact in the second quarter,” the company said.
“In light of this, we are pulling back on advertising and promotional activities, temporarily postponing store remodels, negotiating rent relief, implementing austerity measures … and optimising our raw material cost structure.”
The company’s forecasts came as supply chain disruptions and plunging consumer purchasing affected the world’s second-biggest economy due to the latest Covid-19 surge.
“We designed alternative routes, set up temporary drop-off and pick-up sites and optimised sourcing to fulfil the demand of our store network,” Yum said.
“Our resilient supply chain management has enabled us to lessen disruptions from supply complexities and mobility restrictions.”
Data released on Saturday showed manufacturing and services activity in April at its lowest levels in two years.
Yum China reported first-quarter revenues of $2.67 billion, up 4% from $2.56 billion in the same quarter last year. However, net profit fell 44% to $191 million.
The company, dual listed in Hong Kong and New York, employs more than 400,000 people in China.
Its shares rose about 1% in Hong Kong on Wednesday.
- George Russell