Yum China Defies Cost Headwinds with Aggressive Expansion, Delivery Surge in Q4

Yum China Holdings, Inc. (NYSE: YUMC) posted robust fourth-quarter earnings for 2025, surpassing analyst forecasts on the top and bottom lines. The fast-food giant reported revenue of $2.82 billion, an 8.8% year-over-year increase, while adjusted earnings per share came in at $0.40, beating consensus estimates by 9.2%.

The results underscore the company's aggressive growth strategy in a challenging consumer environment. Management credited the performance to a "dual-engine" approach: rapidly expanding its physical footprint while deepening its digital and delivery ecosystem. In the quarter, Yum China opened a net 1,700 new stores, pushing its total past the 17,000 mark, with a significant portion located in lower-tier cities where competition is less intense and growth potential is higher.

"Our ability to deliver positive same-store sales for three consecutive quarters, even as we add thousands of new locations, speaks to the strength of our brands and operational execution," said CEO Joey Wat. She highlighted successful menu innovations and brand collaborations, like KFC's tie-ups with popular local IPs, as key traffic drivers.

However, the growth narrative is tempered by margin pressures. CFO Adrian Ding noted that while delivery sales volumes continue to climb—a segment now accounting for over 40% of KFC and Pizza Hut China's sales—the associated rider and platform costs are weighing on profitability. Commodity inflation, though moderating, remains a headwind. In response, the company is accelerating its franchise model, leveraging AI tools like "Q Smart" for kitchen efficiency and "SmartK" for inventory management to control costs.

"We are navigating a complex landscape," Ding stated. "Our focus is on balancing growth with discipline, ensuring our expansion is both rapid and profitable."

Looking ahead, Yum China's trajectory will hinge on its ability to monetize its vast new store network and improve delivery economics. Analysts will watch whether its foray into smaller cities can maintain healthy unit economics and if digital investments can offset labor and logistics inflation.

Market Voices: A Split Verdict on Growth vs. Profitability

Michael Chen, Portfolio Manager at Shanghai Horizon Capital: "This is a textbook case of growth execution. Yum China is blanketing the country with stores faster than anyone anticipated, and the delivery infrastructure they've built is a formidable moat. The margin dip is a short-term investment for long-term market dominance."

Lisa Wang, Independent Retail Analyst: "I'm concerned about the quality of this growth. Opening 1,700 stores in a quarter is staggering, but it brings massive execution risk and cannibalization concerns. Are they building a sustainable empire or just a house of cards fueled by capital spending? The franchise shift feels like an admission that company-owned margins are unsustainable."

David Miller, Consumer Strategist at Bloomberg Intelligence: "The results show resilience. In a soft macro environment, people are still ordering fried chicken and pizza. Their move into lower-tier cities is smart—it's where the next wave of Chinese consumer spending is coming from. The key will be leveraging their scale to negotiate better terms with delivery platforms."

Sarah Jennings, Editor at 'The China Foodservice Report': "It's a mixed bag. Beating expectations is good, but the stock's muted post-earnings movement tells you everything. The market is tired of 'growth at all costs' stories. They want to see a clear path to fatter margins. Until then, YUMC will be stuck in a holding pattern."