Pizza Express - Pizza Hut outlines impact from Coronavirus - "Contactless Delivery"

All,

Insights from the Yum China call on Q4 and Q1:

Q4:

Pizza Hut China delivered traffic growth in restaurants and delivery. 

- LfLs were up 1%, but those figures are tainted by the ongoing refurbishment program. In light of this roll-out the positive LfL figure is still somewhat disappointing. Nevertheless, restaurant margin was up in Q4 - see slide below.

- Digital payment lies at 94%. 

- The company is opening 50% of new restaurants in tier 3 and 4 locations. The roll-out continues despite the disruption from the coronavirus.

Coronavirus (figures for all of Yum China): 

- Of the current trend continues the company will generate operating losses.

- The disruption to the business is now “significant”. More than 30% of restaurants have been closed - mostly just ahead of Chinese New Year (first in Wuhan and the surrounding provinces, but now closures across the entire country). Same Store Sales since Chinese New Year at those restaurants remaining open are down by over 40%.

- The company is measuring all staff body temperature on an ongoing basis and has launched "contactless delivery” to protect cooks from riders and riders from clients and vice versa. Delivery has now reached 28% of revenues. 

- The company is delivering over 1000 meals per day to local hospitals etc. to help fight the epidemic. Have re-opened 6 restaurants in Wuhan specifically to do that.

- The cost of containment measures, extra specialist staff and disruption in general is becoming an issue. Chinese new year labour cost is tripple the normal rate and the extended holiday implies double labour cost as well. Management is doing everything to “manage” the labour cost (sounds like lay-offs or other morale damaging measures). SG&A, rent etc. are however relatively fixed in the short term.