Q1 2025 Yum China Holdings Inc Earnings Call

Operator: Good day and thank you for standing by.

Good day, and thank you for standing by and welcome to the Yum, China first quarter 'twenty 'twenty earnings Conference call.

Operator: Welcome to the Yum China First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 and 1 on your telephone. You will then hear an automated message advising your hands and feet. To withdraw your question, please press star 1 and 1 again. Please be advised that today's conference is being recorded. There will also be a Q&A.

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Florence Lip: I would now like to hand the conference over to our speaker today, Florence Lip, Senior Director of Investment Relations. Please go ahead. Thank you, our podium. Hello, everyone.

I would now like to hand, the conference as a kid.

Speaker Change: Tim Mcdonald Chief investment Relations. Please go ahead.

Speaker Change: Thank you operator.

Florence Lip: Thank you for joining Yum China's First Quarter 2025 Earnings Conference Call.

Speaker Change: Hello, everyone. Thank you for joining Yum, China's first quarter 2025 earnings conference call on today's call, our CEO, Ms Joey Wat and our CFO Mr. Adrian day.

Florence Lip: On today's call are our CEO, Ms. Joey Wat, and our CFO, Mr. Adrian Ding. I'd like to remind everyone that our earnings call and investment materials contain forward-looking statements, which are subject to future events and uncertainties. Actual results may differ materially from these four looking states. All forelooking statements should be considered in conjunction with the cautionary statement in our earnings release and the risk factors included in our filings with the SEC. This call also includes certain non-GAAP financial measures. You should carefully consider the comparable GAAP measures. Reconciliation of non-GAAP and GAAP measures is included in our earnings relief, which is available to the public through our investor relations website located at ir.yumchina.com.

Speaker Change: Like to remind everyone that our earnings call and investor materials contain forward looking statements, which are subject to future events and uncertainties actual results may differ materially from these forward looking statements.

Speaker Change: All forward looking statements should be considered in conjunction with the cautionary statement in our earnings release and the risk factors included in our filings with U S E C.

Speaker Change: This call also includes certain non-GAAP financial measures you should carefully consider the comparable GAAP measures reconciliation of non-GAAP and GAAP measures is included in our earnings release, which is available to the public's trout Investor Relations website, located at IR Dot Yum, China Telecom.

Florence Lip: You can also find a webcast of this call and a PowerPoint presentation on our iWeb. Please note that during today's call, all year-over-year growth results exclude the impact of foreign currency.

Speaker Change: You can also find a webcast of this call and a powerpoint presentation on our website.

Speaker Change: Please note that during today's call all year over year growth results exclude the impact of foreign currency unless otherwise noted.

Florence Lip: unless otherwise.

Joey Wat: Now, I would like to turn the call over to Joey Wat, CEO of Yum China. Joey? Hello everyone and thank you for joining us. In quarter one, we delivered another solid set of results. Our dual focus on operational efficiency and innovation led to improvements in both our top and bottom line. We achieved first quarter record highs in revenue, net income, and diluted EPS. Our same-store sales index advanced to 100% of prior year levels. for the first time since the first quarter of 2024. for both KFC and pizza. Same store transactions have grown for nine consecutive quarters.

Speaker Change: Now I would like to turn the call over to Joey Wat CEO of Yum, China Joey.

Joey Wat: Hello, everyone and thank you for joining us.

Joey Wat: In quarter, one we delivered another solid set of results.

Joey Wat: Or do you focus on operational efficiency and innovation led to improvements in both our top and bottom lines.

Joey Wat: We achieved first quarter record highs in revenue.

Joey Wat: Net income and diluted EPS.

Joey Wat: Our same store sales in that.

Joey Wat: The two 100%.

Joey Wat: Prior year level.

Joey Wat: For the first time since the first quarter of 'twenty 'twenty four.

Joey Wat: For both KFC and Pizza hut.

Joey Wat: Same store transactions have grown for nine consecutive quarters.

Joey Wat: As our top line expanded, our margins also improved. restaurant margin expanded by 100 basis points year over year. As a result, our operating profit grew by 8% and dilute EPS increased by 10%. This performance underscores our team's diligent effort and effectiveness of our strategy.

Joey Wat: As our top line expanded our margins also improved.

Joey Wat: Restaurant margin expanded by 100 basis points year over year.

Joey Wat: As a result, our operating profit grew by 8% and diluted EPS increased by 10%.

Joey Wat: This performance underscores our team's diligent efforts and effectiveness of our strategy.

Joey Wat: Last quarter, I mentioned that I felt Pizza Hut had reached an inflation point. I'm pleased to report that we've been able to sustain the positive momentum. In quarter one, we achieved notable improvements in both stem cell cells index and margin. Pizza Hut's 2025 new menu, further enhanced its value for money proposition and mass market positioning. driving significant traffic growth. It also enabled simpler operations, contributing to the restaurant margin improvement in Q1.

Joey Wat: Last quarter, I mentioned that I felt pizza hut had reached an inflection point.

Joey Wat: I'm pleased to report that we've been able to sustain the positive momentum.

Joey Wat: In quarter, one we achieved notable improvements in both same store sales in death and margins.

Joey Wat: Pizza Hut's 2025, new menu further enhanced its value for money proposition and mass market positioning.

Joey Wat: Driving significant traffic growth.

Joey Wat: It also enables a simpler operations contributing to the restaurant margin improvement in Q1.

Joey Wat: KFC remains a resilient fortress. Achieving solid growth and profitability through both good times and bad. In Q1, KFC's system sales grew by 3% and its restaurant margin expanded to 19.8%. In Q1, we also opened 300 k-coffee cafes, reaching a total of 1,000 locations nationwide.

Joey Wat: KFC remains resilient and fortress.

Joey Wat: Achieving solid growth and profitability through both good times and bad.

Joey Wat: In Q1, KFC system sales grew by 3% and is restaurant margin expanded to 19, 8%.

Joey Wat: In Q1, we also opened 300 K coffee cafes.

Joey Wat: Reaching a total of 1000 locations nationwide.

Adrian Ding: Let me now turn the call over to Adrian to discuss our results in detail. Afterward, I will share additional color on our strategies.

Adrian: Let me now turn the call over to Adrian to discuss our results in detail.

Adrian: What I will share additional color on our strategies Adrian.

Adrian Ding: Adrian. Thank you, Joey.

Adrian Ding: Let me start with KFC. In the first quarter, KFC delivers solid sales and profit growth. We added 295 net new stores, bringing our total to 11,943 stores. New store payback remain healthy at two years. System sales increased 3% year-over-year. Samesource sales index amounts to 100% of prior year level for the first time since the first quarter of 2024, fueled by Samesource transaction growth of 4%. We observe strong growth in smaller orders driven by wider price ranges, lower delivery fees, and rapid growth in coffee. The ticket average for Quarter 1 was 40 yuan, 4% lower than the prior year period, similar to the trend in the second half of 2024.

Adrian: Thank you Joey let me start with KFC.

Adrian: In the first quarter KFC delivered solid sales and profit growth.

Adrian: We added 295 net new stores.

Adrian: Our total to 11943 stores.

Adrian: Neutral what payback remain healthy at two years.

Adrian: System sales increased 3% year over year.

Adrian: Same store sales index amongst 100% no prior year level for the first time since the first quarter of 2024 fueled by same store transaction growth of 4%.

Adrian: We observed strong growth in smaller orders driven by wider price ranges.

Adrian: Delivery fees.

Adrian: Rapid growth in coffee.

Adrian: The ticket average for quarter, one was 41.

Adrian: 4% lower than the prior year period.

Adrian: To the trend in the second half of 2024.

Adrian Ding: There may still be some short-term fluctuations, but we expect the TA to be relatively stable over the long run. Despite a lower TA, restaurant margin improved by 50 basis points year-over-year to 19.8%. Operating profit grew 5% year-over-year to $386 million.

Adrian: There may still be some short term fluctuations.

Adrian: Expect that to be relatively stable over the long run.

Adrian: Despite a lower Ta restaurant margin improved by 50 basis points year over year to 19, 8%.

Adrian: Operating profit grew 5% year over year to $386 million.

Adrian Ding: We innovated by adding fresh twists to our classic menu items to excite customers and fulfill their changing needs. KFC launched a spicy flavor of original recipe chicken for the first time since we entered China in 1987. The classic taste pairs well with the exotic spicy flavor. Sales mix of original recipe chicken increased 50% during the promotion period. We also introduced the spicy original recipe chicken burger, which of course comes with the mashed potatoes. These innovative new products resonate well with our consumers, not just regionally, but nationwide, attracting new traffic.

Adrian: We innovated by adding fresh twist to our classic menu items to excite customers and fulfill their changing needs.

Adrian: KFC launch a spicy flavor of original recipe chicken for the first time since we entered China 1987.

Adrian: The classic base pairs, well with an exotic spicy flavor.

Adrian: Sales mix of original recipe chicken increased 50% during the promotion periods.

Adrian: We also introduced a spicy original recipe chicken Burger, which of course comes with the mashed potatoes.

Adrian: These innovative new products resonate well with our consumers mattress originally.

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Adrian Ding: Serving buckets has been a Chinese New Year tradition for KFC. This year, we enhanced the golden bucket by including our popular whole chicken, making it even more ideal for sharing. To address the trend of smaller gatherings, we also offered a variety of smaller buckets. Total sales of our Chinese New Year buckets grew over 50% year over year.

Adrian: Serving bucket has been a Chinese new year tradition for KFC.

Adrian: This year, we enhanced our golden bucket by including our popular whole chicken.

Adrian: Making it even more ideal for sharing.

Adrian: To address the trend of smaller gatherings will also offered a variety of smaller buckets.

Adrian: Total sales of our Chinese new year buckets grew over 50% year over year.

Adrian Ding: Let's now move on to Pizza Hut. For four consecutive quarters, Pizza Hut has achieved significant progress. marked by sequential improvement in the same-store sales index and year-over-year margin expansion. Operating profit also grew 29% year-over-year in Q1. In quarter one, system sales increased 2% year over year. Sainsbury's sales index advanced 100% of prior year level. Also, for the first time since the first quarter of 2024, up 2 percentage points versus quarter 4 last year. Same sort transactions grew substantially by 17% year over year. driven by rapid delivery growth, increased popularity of pizzas below 50 yuan and the successful launch of our new menu.

Adrian: Let's now move onto Pizza hut.

Adrian: For four consecutive quarters Pizza hut has achieved significant progress.

Adrian: Marked by sequential improvement in the same store sales index, a year over year margin expansion.

Adrian: Operating profit also grew 29% year over year in quarter one.

Adrian: In quarter, one system sales increased 2% year over year.

Adrian: Same store sales index advanced 100% no prior year level.

Adrian: Also for the first time since the first quarter of 2024.

Adrian: Up two percentage points versus quarter four last year.

Same store transactions grew substantially by 17% year over year.

Adrian: Driven by rapid delivery growth.

Adrian: Kris popularity of Pizza is below 51, and the successful launch of our new menu.

Adrian Ding: Ticket average was 78 yuan, 14% lower year-over-year. consistent with our strategy and driven mainly by better value for money offered by our new menu. Again, despite the lower TA, restaurant margins improved 190 basis points year-over-year. Our new menu allows for simpler preparation at our stores. We also automated key kitchen processes.

Adrian: The ticket average was 78, 114% lower year over year.

Adrian: Consistent with our strategy and driven mainly by better value for money offer by our new menu.

Adrian: Again, despite the lower Ta restaurant margins improved 190 basis points year over year.

Adrian: Our new menu will allow for simpler preparation that our stores.

Adrian: We're also automated kitchen processes.

Adrian Ding: Additionally, Pizza Hut's All-You-Can-Eat campaign that took place in Quarter 1 last year was shifted to Quarter 2 this year, and this accounted for nearly half of the year-over-year margin improvement. Pizza Hut has expanded to 3,769 stores. with a net addition of 45 stores in Quarter 1.

Adrian: Additionally, pizza hut or you can you can paint that took place in quarter. One last year was shifted to quarter. Two this year and this accounted for nearly half of the year over year margin improvements.

Adrian: Pizza Hut has expanded to 3769 stores.

Adrian: With a net addition of 45 stores in quarter one.

Adrian Ding: This number is lower than last year due to the timing of store openings and closures. For the full year, we expect double-digit percent net new store growth for Pizza Hut. The payback period for new stores remains healthy at two to three years. Pizza Hut has made tremendous efforts to improve its menu and widen its addressable market. The new menu launched in December 2024 altered Pizza Hut's value for money perception and significantly boosted consumer trust. In March, we further upgraded the menu with new products such as expanded selection of pizza dough burgers and more one-person meal options.

Adrian: This number is lower than last year due to the timing of store openings and closures.

Adrian: For the full year, we expect double digit percent net new store growth for Pizza hut.

Adrian: The payback period for new stores remains healthy at two to three years.

Adrian: Pizza Hut has made tremendous efforts to improve its menu and widen its addressable market.

Adrian: The new menu launched in December 2024, altered pizza hut's value for money perception and significantly boosted consumer traffic.

Adrian: In March we further upgraded the menu with new products.

Adrian: As expanded selection of pizza toll biogas and more one person new auctions.

Adrian Ding: For a limited time, consumers enjoy our super supreme pizza at just 39 yuan. half the regular. Consumers love our flagship Super Supreme flavor, so we extended it from a pizza platform to other platforms, such as burgers, pasta, and rice.

Adrian: For a limited time consumers enjoy our Super Supremes Pizza at just 30 91.

Adrian: Half the regular price.

Adrian: Consumers love our flagship Super Supreme flavor. So we extended it from a pizza platform to other platforms, such as Burger pasta and rice.

Adrian Ding: Let me now go through our quarter one P&L. For quarter one, system sales grew 2% year over year. and Sainstore Sales Index was 100% of priority level.

Adrian: Let me now go through our quarter one P&L.

Adrian: For quarter, one system sales grew 2% year over year.

And same store sales index was 100% of prior year level.

Adrian Ding: System self-growth was moderated this quarter for three reasons. First, 2025 has one fewer business day as 2024 was a leap year, a 1% impact. Second, we have slightly more temporary closures during the Chinese New Year holiday this year compared with the prior year. We carefully evaluated college traffic patterns in various trade zones and dynamically adjusted our store operations. This enables us to serve our consumers' needs better and more efficiently. In Quarter 1, 9 new units contributed 4% to sales growth. We're opening more smaller stores and expanding to lower tier cities. Also, we strategically chose more stores to enhance the strength of our store portfolio for better overall performance.

Adrian: System sales growth was moderate this quarter for three reasons.

Adrian: First.

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Adrian: 94 was a leap year, a 1% impact.

Adrian: Second we have slightly more temporary closures during the Chinese new year holiday this year compared with the prior year.

Adrian: We carefully evaluated holiday traffic patterns in Paris create zone and dynamically adjusted our store operations.

Adrian: This enable us to serve our consumers needs better and more efficiently.

Adrian: In quarter, one net new units contributed 4% to sales growth.

Adrian: We're opening more smaller stores and expanding into lower tier cities.

Adrian: Also we are strategically close more stores to enhance the strength of our store portfolio for better overall performance.

Adrian Ding: This led to lower sales growth in quarter one, which will normalize as the year progresses. Our retro margin was 18.6%, 100 basis points higher year over year. Savings in cost of sales and occupancy and other costs offset increases in cost of labor. Cost of sales was 31.2%. Nike bases point lower year over year. Cost-of-sales improved through favorable commodity prices and continued benefits from Project Red Eye. We continue to pass these savings from these initiatives to our consumers. offering excellent value for money.

Adrian: This led to lower sales growth in quarter, one, which will normalize as the year progresses.

Adrian: Our restaurant margin was 18, 6% 100 basis points higher year over year.

Adrian: Savings in cost of sales and occupancy and other costs offset increases in cost of labor.

Adrian: Cost of sales was 31, 2%.

Adrian: 90 basis points lower year over year.

Adrian: Cost of sales improved through favorable commodity prices and continued benefits from project Red.

Adrian: We continue to pass these savings from these initiatives to our consumers.

Adrian: Offering excellent value for money.

Adrian Ding: The timing shift of Pizza Hut's All-You-Can-Eat campaign also positively impacted quarter one cost of sales. Cost of labor was 25.7%. 30 basis points higher year-over-year due to higher rider cost as percentage of sales. While cost per delivery order lowered, increased delivery volume led to higher overall rider Non-riser costs as percent of sales remain stable year over year. Simplified operations help offset low single-digit wage inflation for our front-line staff. Occupancy and other was 24.5%. 40 basis points lower year over year. as a result of the cost optimizations in a number of areas, notably utilities and simplified operations.

Adrian: The timing shift of Pizza has all U K a campaign also positively impacted quarter one cost of sales.

Adrian: Cost of Labor was 25, 7%.

Adrian: 30 basis points higher year over year due to higher rider cost as percentage of sales.

Adrian: While cost per delivery order lowered increase deliver volume led to higher overall rider costs.

Adrian: None of the rider costs as a percent of sales remained stable year over year.

Adrian: Simplified operations help offset low single digit wage inflation for our frontline staff.

Adrian: Occupancy and other was 24, 5%.

Adrian: 40 basis points lower year over year.

Adrian: As a result of the cost optimization, and a number of areas, notably utilities and simplified operations.

Adrian Ding: G&A expenses were 4.6% of the revenue and 10 business points lower compared to 4.7% in the prior year.

Adrian: G&A expenses were four 6% of the revenue and 10 basis points lower compared to four 7% in the prior year.

Adrian Ding: Closure and impairment expenses increase year over year due to our strategic store optimization. Our OP margin was 13.4%, 80 basis points higher year-over-year, mainly driven by improved restaurant margin. Operating profit was $399 million, growing 8% year over year. Co-OP also grew 8% year over year. Effective tax rate was 27.8%. 90 basis points higher year-over-year. Net income was $292 million. growing 3% year over year.

Adrian: Closure and impairment expenses increased year over year due to our strategic store optimization.

Adrian: Our op margin was 13, 4%.

Adrian: Basis points higher year over year, mainly driven by improved restaurant margin.

Adrian: Operating profit was $399 million growing 8% year over year.

Adrian: <unk> also grew 8% year over year.

Adrian: Effective tax rate was 27, 8%.

Adrian: 90 basis points higher year over year.

Adrian: Net income was $292 million.

Adrian: Only 3% year over year.

Adrian Ding: As a reminder, we recognize $12 million less interest income this year due to a lower cash balance as a result of the cash used for shareholder returns. A mark-to-market equity investment also had a positive impact of $2 million in Q1 compared to a positive impact of $6 million in Q1 last year. Diluted EPS was 77 cents. growing 10% year-over-year, or 12% excluding the market-to-market equity investment impact.

Adrian: As a reminder, we recognized $12 million less interest income this year due to a lower cash balance as a result of the cash used for shareholder returns.

Adrian: Our mark to market equity investment also had a positive impact of $2 million in quarter, one compared to a positive impact of $6 million in quarter, one last year.

Adrian: Diluted EPS was <unk> 77 cents.

Adrian: Growing 10% year over year or 12%, excluding the mark to market equity investment impact.

Adrian Ding: Let's now move on to Capital Return to Shareholders. We're on track to return $3 billion to shareholders in 2025 through 2026. This is on top of the $1.5 billion in cash we returned in 2024. The average annual amount of capital return over the three years is around 8-9% of our current market cap. in quarter one would return $262 million with $172 million in share repurchases and $90 million in quarterly cash dividends. Our cash position remains healthy. We ended the quarter with $2.8 billion in net cash.

Adrian: Let's now move on to capital returned to shareholders.

Adrian: We are on track to return $3 billion to shareholders in 2025 through 2026.

Adrian: This is on top of the $1 $5 billion in cash we returned in 2024.

Adrian: The average annual amount of capital return over the three years, it's around 8% to 9% of our current market cap.

Adrian: In quarter, one would return $262 million with $172 million in share repurchases and $90 million in quarterly cash dividends.

Adrian: Our cash position remains healthy.

Adrian: We ended the quarter with $2 $8 billion in net cash.

Adrian Ding: Finally, moving on to our 2025 Outlook. were operating in a complex and evolving landscape. Consumer spending remains rational. Our strategy is to offer innovative food and great value to drive traffic to our stores. We're working hard to achieve 10 consecutive quarters of positive same-store transaction growth in Q2. That said, we remain cautious about potential fluctuations in same-store sales index. even with many moving parts. We reiterate our 2025 four-year guidance of mixed single-digit system sales growth. We expect to ramp up net store openings as the year progresses. for the full year. We're on track to open 1,600 to 1,800 new stores.

Adrian: Finally, moving on to our 225 outlook.

Adrian: We're operating in a complex and evolving landscape.

Adrian: Consumer spending remains rational.

Adrian: Our strategy is to offer innovative food and great value to drive traffic to our stores.

Adrian: We're working hard to achieve 10 consecutive quarters of positive same store transaction growth in quarter two.

Adrian: That said, we remain cautious about potential fluctuations in same store sales index.

Adrian: Even with many moving parts.

Adrian: We reiterate our 2025 full year guidance of mid single digit system sales growth.

Adrian: We expect to ramp up net store openings as the year progresses.

Adrian: For the full year, we're on track to open 6800 to 800 100 net new stores.

Adrian Ding: In quarter one, we opened 247 new stores, with franchise stores accounting for 41% of KFC menu opens and 33% for Pizza Hut. Franchise venues were mixed for the 2025-year is expected to be lower.

Adrian: In quarter, one we opened 247 net new stores.

Adrian: With franchise towards accounting for 41% of KFC menu opens and 33% for pizza huts.

Adrian: Franchise brand new store mix for the 20 152 year is expected to be lower.

Adrian Ding: mid to long term, our outlook is unchanged. We expect the franchise net new store mix to reach 40-50% for KFC and 20-30% for Pizza Hut over the next few years. We also target to maintain or slightly improve core OP margins for the full year. on the cost of sales firms. We anticipate modest year-over-year improvements compared to 2024, remaining between 31 and 32%. We expect no material impact from tariff. as over 90% of our procurement is sourced locally. The direct impact from U.S. imports on our cost is expected to be minimal.

Adrian: Mid to long term our outlook is unchanged.

Adrian: We expect the franchise net new store mix to reach 40% to 50% for KFC and 20% to 30% for Pizza hut over the next few years.

Adrian: We also target to maintain or slightly improve core op margins for the full year.

Adrian: On the cost of sales front we.

Adrian: We anticipate modest year over year improvements compared to 2024.

Adrian: The remaining between 31% and 32%.

Adrian: We expect no material impact from tariffs.

Adrian: As over 90% our procurement is sourced locally.

Adrian: The direct impact from U S imports on our cost is expected to be minimal.

Adrian Ding: Additionally... We have evaluated the indirect impact of tariffs on upstream suppliers. Alternative raw material solutions are available along our supply chain, so we are protected at the moment, but we will monitor the situation closely.

Adrian: Additionally.

Adrian: We have evaluated the indirect impact of tariffs on our upstream suppliers.

Adrian: Alternative raw materials solutions available allow our supply chain. So we're protected at the moment.

But we will monitor the situation closely.

Adrian Ding: Moving on to cause of labor. We continue to face pressure on the total rider cost driven by rapid delivery growth. Our goal for non-rider cars is to keep them stable by offsetting the weight inflation of a frontline staff through more automation, simplification, and centralization. In terms of occupancy and other, as a percentage of sales, these are likely to stay relatively stable year over year. We continue to explore optimization opportunities to offset cost increases. By brand, we expect retro margin at KFC to be healthy and stable year over year, and Pizza Hut's margin to improve in the mid to long run.

Adrian: Moving onto cost of labor.

Adrian: We continue to face pressure on the total rider costs driven by rapid delivery growth.

Adrian: Our goal for non dry dock cost is to keep them stable by offsetting the wage inflation of our frontline staff through more automation simplification and centralization.

Adrian: In terms of occupancy and other as a percentage of sales.

Adrian: These are likely to stay relatively stable year over year.

Adrian: We continue to explore optimization opportunities to offset cost increases.

Adrian: By brand, we expect restaurant margins at KFC to be healthy and stable year over year and pizza hut margin to improve in the mid to long run.

Adrian Ding: Lastly, we expect our GNA expenses as a percentage of revenue to slightly decrease and the effective tax rate to be in the high 20s. In terms of quarterly phasing, we expect tougher year-over-year margin comparisons later in the year. More meaningful benefits started to trickle in from Project Fresh Eye in Q2 of 2024 and from Project Red Eye in the second half of 2024. Overall, we're working hard towards our four-year target.

Adrian: Lastly, we expect our G&A expenses as a percentage of revenue to slightly decrease in the effective tax rate to be in the high twenty's.

Adrian: In terms of quarterly phasing, we expect copper and year over year margin comparisons later in the year.

Adrian: More meaningful benefits started to trickle, England from project fresh high in quarter, two of 2024 and from project Red eye in the second half of 2024.

Adrian: Overall, we are working hard towards our full year targets.

Joey Wat: Let me pass it back to Joey for her closing remarks. Thank you, Adrian. Now let me spend some time on our strategy. Like everyone else, we are navigating choppy waters. But we have an excellent team capable of turning challenges into opportunity. We will stay alert and concentrate on what we can manage. Our customers continue to love our brand. our delicious, innovative food, and our very affordable price. Our widened price ranges fueled healthy transaction growth. We also offer abundant emotional value to customers. The 85th anniversary of KFC's original recipe chicken, Yuan Wei Ji Ba Si Wu Zhou Nian, brought back childhood memories for our customers.

Joey Wat: Let me pass it back to Joey for her closing remarks.

Joey Wat: Thank you Adrian.

Joey Wat: Now, let me spend some time on our strategy.

Joey Wat: Like everyone else, we are navigating choppy waters.

But we have an excellent team capable of turning challenges into opportunities.

Joey Wat: We will stay alert and concentrate on what we can manage.

Joey Wat: Our customers continue to love our brand.

Joey Wat: Our delicious innovative food and our very affordable prices.

Joey Wat: Our widened price ranges field healthy transaction growth.

Joey Wat: We also offer a bundled and emotional value to customers.

Joey Wat: The 85th anniversary of Kfc's original recipe chicken young Lady faster with Julianne drop that childhood memories for our customers.

Joey Wat: Pizza Hut celebrates Chinese New Year by wishing them good fortune with the Fortune Cat Crush Pizza, Zao Cai Mao Bing Ding. We also collaborate with top IPs to offer member-exclusive deals through our own online and offline channels. A notable example was our campaign with the popular Chinese mobile game, Identity V, 第五人格。 We include tangible and virtual accessories with our meals, successfully engaging many young customers. Besides our amazing food and value, we offer exceptional convenience. With over 16,000 stores in 2,300 cities across China, we are rapidly expanding our store portfolio and deepening our reach. Our innovative and flexible store models help us profitably expand our addressable market and capture additional dining opportunities.

Joey Wat: Pizza hut celebrate Chinese new year by reaching them.

Joey Wat: Fortune with the fortune kit crust pizza.

Speaker Change: Hi, Mo Bnb.

Speaker Change: We also collaborate with top IP is to all of the member exclusive deals through our own online and offline channels.

Speaker Change: A notable example was our campaign with a popular Chinese mobile game identity five.

Speaker Change: Sure.

Speaker Change: We include tangible and virtual accessories with our meals successfully engaging many young customers.

Speaker Change: Besides amazing food and value we offer exceptional convenience.

Speaker Change: With over 16000 stores in 2300 cities across China, we.

We are rapidly expanding our store portfolio and deepening our reach.

Speaker Change: Our innovative and festival store models help us profitably expand our addressable market and capture additional dining opportunities.

Joey Wat: At KFC, K-Coffee sustained strong growth in quarter one. With both cups and sales up around 20% year over year, we see huge growth potential by leveraging KFC's customers and membership base. In particular, a large majority of our members have yet to try Keiko. By utilizing KFC footprint, K-Coffee Cafe is expanding rapidly in this high potential market. The incremental investment is like Both equipment and resources can be shared. With 1000 k coffee cafes now, we're aiming for 1500 locations by end of 2025. which is 200 more than our original target. On the menu side, in addition to our signature sparkling Americano, Qipao Meishi, we introduce premium Geisha beans, Guixia Kafei Dou, for coffee lovers at just 12.9 RMB.

Speaker Change: At KFC.

Speaker Change: The sustained strong growth in quarter, one with both cups and sales up around 20% year over year, we see huge growth potential by leveraging kfc's customers and membership base.

Speaker Change: In particular, a large majority of our members had yet to try take coffee.

Speaker Change: By utilizing KFC footprint.

Speaker Change: Coffee cafe is expanding rapidly in this high potential market.

Speaker Change: The incremental investment is light.

Speaker Change: <unk> equipment and resources can be shared.

Speaker Change: We have 1000 K coffee cafes now we're aiming for 1500 locations by end of 2025.

Speaker Change: Which is 200 more than our original target.

Speaker Change: On the menu Assai in addition to our signature sparkling Americano chaparral mission.

Speaker Change: We introduced premium geisha beans, please yes.

Speaker Change: Capital.

Speaker Change: Coffee lovers.

Speaker Change: <unk> 12 per nine RMB.

Joey Wat: We also launched a matcha mocha lineup for tea drinkers, boosting afternoon sales. Having coffee in the morning and tea in the afternoon is a great way to stay energized.

Speaker Change: We also launched a matter mortara lineup for key drilling tools.

Speaker Change: <unk> afternoon.

Speaker Change: Having coffee in the morning and key in the afternoon is a great way to stay energized.

Joey Wat: A piece of heart. VAL is a simpler and more efficient model. compared to the regular Pizza Hut. Wells per person spending is lower. A simpler menu, entry price point products, and sharp value for money appeal to young people and solo diners. As we fine-tune the model, restaurant margin has expanded year over year. Building on the successful conversion of some Pizza Hut stores to the Vau model, we have started opening new Vau stores. A brand new wild store's crepes can be as low as half of a regular pizza hostel. with reduced capex. lower-per-person spending and simplified operations while seem suitable for lower-tier cities, thereby expanding Pizza Hut's addressable market.

Speaker Change: At Pizza hut.

Speaker Change: <unk> is a simpler and more efficient model.

Speaker Change: Compared to the regular pizza hut.

Speaker Change: <unk> per person is spending is lower.

Speaker Change: It's simpler menu.

Speaker Change: Entry price point products and shop value for money.

Speaker Change: Two young people and solar diners.

Speaker Change: As we fine tune the model.

Speaker Change: Restaurant margin has expanded year over year.

Speaker Change: Building on the successful conversion of some pizza hut stores to Dunbar model.

Speaker Change: We have stopped opening new stores.

Speaker Change: Our brand new <unk> stores.

Speaker Change: It can be as low as half of our regular pizza hospital.

Speaker Change: With reduced Capex.

Speaker Change: Lower per person spending and simplified operations.

Speaker Change: Since suitable for lower tier cities.

Speaker Change: By expanding pizza huts addressable market.

Joey Wat: Turning to a dual focus on operational efficiency and innovation. Our approach is to rethink our operations from fresh perspectives. Over the past two years, we launched Project Fresh Eye and Project Red Eye. These initiatives will continue to benefit us far into the future. We have streamlined our menu, simplified food preparation, centralized certain processes, and deployed more automation. Our innovative approach enables us to maintain consistent standards for quality and service. Technology and innovation play a crucial role in boosting efficiency. Our end-to-end digitization covers key operational processes. from customer service and quality control to staffing and inventory management.

Speaker Change: Turning to our do you focus on operational efficiency and innovation.

Speaker Change: Our approach is to rethink our operations from fresh perspectives.

Speaker Change: Over the past two years, we launched project fresh eye and project.

Speaker Change: These initiatives will continue to benefit us.

Speaker Change: Into the future.

Speaker Change: We have streamlined our menu simplified foot preparation.

Speaker Change: Centralized certain processes and deploy more automation.

Speaker Change: Our innovative approach enable us to maintain consistent standards for quality and service.

Speaker Change: Technology and innovation play a crucial role in boosting efficiency.

Speaker Change: Our end to end Digitization covered key operational processes.

Speaker Change: Customer service and quality control to starving inventory management.

Joey Wat: There are numerous examples. Just to name a few, we leverage AI to analyze customer feedback from various platforms. This means we can swiftly adjust our operations after a new product launch, often within just a day or two. In our digital customer service center, generative AI helps customers resolve around 90% of issues before they reach our team. We are also exploring the use of robotics to further advance our operational capabilities.

Speaker Change: There are numerous examples.

Speaker Change: Just to name a few will leverage AI to analyze customer feedback from various platforms.

Speaker Change: This means we can swiftly adjust our operations after a new product launch.

Speaker Change: All of them within just a day or two.

Speaker Change: In our digital customer service center generated AI helps customers resolve around 90% of all insurers before they reach our team.

Speaker Change: We are also exploring the use of robotics.

Speaker Change: Further advance our operational capabilities.

Joey Wat: Before we turn to Q&A, I would like just to recap the three key takeaways from today. First, KFC continues to be a resilient fortress. Performing well through both good times and bad.

Speaker Change: Before we turn to Q&A.

Speaker Change: I would like just to recap the three key takeaways from today.

Speaker Change: First KFC.

Speaker Change: <unk> continues to be resilient portrayed.

Speaker Change: Performing well through both good times and bad.

Joey Wat: Pizza Hut has maintained its positive momentum following last year's inflation point. Second, we are broadening our addressable markets with expanded menus, widened price ranges, and innovative models. These include K Coffee Cafe, as well as KFC Small Town Mini, and Pizza Hut Wild Models.

<unk> has maintained its positive momentum following last year's inflection point.

Speaker Change: Second.

We are broadening our addressable market with expanded menus.

Speaker Change: And the price ranges and innovative models.

Speaker Change: These include a K coffee cafe as.

Speaker Change: As well as KFC small time, many and pizza hut while models.

Joey Wat: Lastly, we remain committed to our dual-focus strategy of enhancing operational efficiency and fostering innovation to capture the amazing opportunities in China and create long-term value for our shareholders.

Speaker Change: Lastly, we remain committed to our focused strategy of enhancing operational efficiency and fostering innovation to capture the amazing opportunities in China and create long term value for our shareholders.

Florence Lip: With that, I will pass it back to Florence. Thanks, Joey.

Florence: With that I will pass it back to Florence.

Florence Lip: Now, we will open the call for questions. In order to give more people the chance to ask questions, please limit your questions to one at a time. Operator, please start the Q&A.

Florence: Joey now we will open the call for questions in order to give more people the chance to ask questions. Please limit your questions to one at a time.

Florence: Please start the Q&A.

Operator: Thank you. As a reminder, to ask a question you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Please stand by while we compile the Q&A queue.

Thank you as a reminder to ask a question you will need to press star one on one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one and one again.

Florence: Please standby, while we compile the Q&A queue.

Florence: Yes.

Florence: Okay.

Lillian Lou: Our first question comes from the line of Lillian Lou from Morgan Stanley. Please go ahead, your line is open. Hello, can you hear me? Yep, this is Lillian. Oh, okay. Thanks, Joey and Adrian and Florence.

Speaker Change: Our first question comes from the line of Lillian Lou from Morgan Stanley. Please go ahead. Your line is open.

Lillian Lou: Hello can you hear me.

Logan: Yes. This is Logan, okay, Thanks, Joe Yeah, Adrian and Florence.

Lillian Lou: My question is more on the competition and the demand trend. After first view, we've been seeing a bit general consumption slowdown post-Chinese New Year. So I want to understand any kind of new update of our business trend. And in particular, since April, we all know that JD started to push on delivery with big subsidies. And a lot of our competitors and the local players are joining.

Lillian Lou: My question is more on the.

Logan: The competition in the demand trends.

Logan: After first SKU.

Logan: We've been seeing a better general consumption slowdown post Chinese new year. So one I understand any kind of annual update of our business trend and in particular since April we all know that JV starts to push on delivery with speak subsidies and a lot of our competitors and the local players.

Joey Wat: So any impact to our business so far and our strategy to this for the aggregator competition, if such competition gonna last for longer run? Thank you. Thank you, Lillian. So far, our April performance is in line with our expectations. And we have not observed any significant negative impact. Um, but yet we continue to be watchful.

Johnny: Johnny So any impact to our business, so far and our strategy.

Logan: To this for the aggregate or competition from such competition on that last for a longer run.

Johnny: <unk>.

Lillian Lou: Thank you Lillian.

Speaker Change: So far our April performance is in line with our expectations and we have not.

Lillian Lou: Observe any significant negative impact.

Speaker Change: But yet we continue to be watchful.

Joey Wat: Let me comment on the consumer trends and then and then touch upon the JD question. We, as I mentioned, I, we really have not observed any significant negative impact on our business. But of course, of course, the situation remains fluid and we'll continue to be alert and monitor the trends with multiple scenario marketing planning.

Lillian Lou: Let me comment on the consumer trends and then and then touch upon the J D question.

Speaker Change: We as I mentioned.

We really have not.

Speaker Change: Any significant negative Intel on updates.

Speaker Change: But let's call it of course the situation remains fluid.

Speaker Change: We will continue to be a nuts and monitor the trends.

Speaker Change: Multiple scenario modeling planning.

Joey Wat: So with all these macro sort of challenging environment, I just want to point out that we have successfully navigated a wide range of market conditions in the last 30 some years. Even in the last few quarters, we have faced challenging market conditions for some time, but we have consistently demonstrated our ability to thrive in both good times and bad times.

Speaker Change: So.

Speaker Change: With all these macro selloff.

Speaker Change: Challenging environment I, just want to point out that we have successively navigate a wide range of market conditions in the last 30 some years even in the last few quarters, we have faced challenging market conditions for some time, but we have.

Speaker Change: <unk> demonstrated our ability to thrive in both good times and bad times.

Joey Wat: I would like to make three points about the consumer sentiment. Point one is we are in China and dedicated to serving the Chinese people. And both KFC and Pizza Hut are well-recognized brands, beloved by Chinese consumers. And we serve over two billion customers annually. We have very strong customer support and established deep connection with them. And in general, Chinese consumers have become more rational, sophisticated and very pragmatic.

Speaker Change: Like to make three points about the.

Speaker Change: The consumer sentiment.

Speaker Change: <unk> wise, we are in China, and dedicated to serving the Chinese people.

Speaker Change: And all KFC and Pizza Hut hut.

Speaker Change: <unk> recognized brands they love by Chinese consumer when we serve over 2 billion customers annually.

Speaker Change: We have a very strong customer support and establish deep connection with and in general Chinese consumers have.

Speaker Change: <unk> become more rational sophisticated and very frenetic.

Joey Wat: Point two is we are also well-recognized for supporting millions of jobs in China and giving back to the community. You know, some example, like 18 years of one-year donation, and then food bank in over 1,000 store, et cetera, et cetera. So is our suppliers and franchisees and business partners are very supportive. So we have good momentum.

Speaker Change: Two is we are also well recognized for supporting millions of jobs in China, and giving back to the community.

Speaker Change: Some example of 18 years of one yen donation and then put them in over 1000.

Speaker Change: Et cetera.

Speaker Change: It is all suppliers and franchisees and business partners are very supportive. So we have good momentum.

Joey Wat: In terms of competition, in terms of the question regarding the JD, I would like to make two points. One is we are open to work with all platforms. Our goal is always to serve customers where they are and attract new customers. With that said, we do things at our own pace. We always balance short-term and long-term considerations. Second point is, even as we expand our aggregator platform, and by the way, we have continued to grow our delivery business for 11 years, and we just delivered another double digit, or 13% increase in delivery business. We continue to maintain strong control over our business.

Speaker Change: It sounds real competition.

Speaker Change: In terms of the question regarding the J D.

Speaker Change: I would like to make two points.

Speaker Change: One is we are open to work with all platforms. Our goal is always to serve customers, where they are attracting new customers with that said.

Speaker Change: We do things at our own pace.

Speaker Change: This balance short term and long term considerations.

Speaker Change:

Second point is even as we expand.

Aggregate our platform and by the way we have continue to grow our delivery business for us.

Speaker Change: 11 years, and we just deliver another double digit or 13%.

Speaker Change: Kris and deliberate business, we continue to maintain strong control over our business up over 70% of ourselves outside the delivery Aggregators. So 70% business include diene takeaway and now own very own delivery channels are our own.

Joey Wat: Over 70% of our sales are outside the delivery aggregators. So these 70% business include buy-in, take-away, and our own, very own delivery channels. Our own APP exclusive perks further drive customers.

Speaker Change: Exclusive perks further drive customers.

Lillian Lou: So, you know, that's where we are, and I think as of yesterday or today, there's another company stepping up the delivery competition. So we'll remain, you know, watchful, and then we'll balance our strategy in the short term, long term. Thank you, Lillian. Thanks a lot, Joey. That's very helpful. Thank you.

Speaker Change: So that's where we are and I think as of yesterday or today, that's another compelling stepping up.

Speaker Change: Delivery.

Speaker Change: Competition, so oh well remain.

Speaker Change:

Speaker Change: Watchful and then well balanced.

Speaker Change: Our strategy in the short term Milton Thank you in advance.

Speaker Change: Yeah.

Joe: Thanks, a lot Joe you that's very helpful.

Michelle Cheng: We'll now move on to our next question. Our next question comes from the line of Michelle Cheng from Goldman Sachs. Please go ahead, your line is open. Hi, Joey, Adrian and Florence. Thanks for taking my question. My question is regarding Pizza Hut. The first quarter Pizza Hut's Sam's Toast sales and margins were really impressive. Especially we know that actually first quarter last year, the Sam's Toast sales base was high, given the OUK campaign. So can you share with us, how do you think about the Sam's Toast sales trajectory in the rest of the year? And also on margins, with this OUK campaign, how this will impact the near-term margin, while these low efficiency gain and the Sam's Toast sales operating leverage is positive side, and this should be a positive driver for the rest of the year.

Speaker Change: Thank you we will now move onto our next question.

Joe: Okay.

Our next question comes from the line of Michelle Cheng Goldman Sachs. Please go ahead. Your line is open.

Speaker Change: Hi, Joey Hey, John and Paul Thanks for taking my question. My question is regarding Pizza hut. The first quarter Pizza hut same store sales and margins were really impressive, especially we know that actually the first quarter last year. The same store sales base was high given the all.

Speaker Change: So can you share with us how do we think about the same store sales trajectory. The wrath of the year in second quarter. We know we launched a whole U K campaign again so.

Speaker Change: And but on top of that we have easier base supportive all second quarter last year. So should we have.

Speaker Change: Better patient on the same store sales and.

Speaker Change: <unk>.

Margins are we either diesel Okay campaign holidays, where you've had the near term margin. While these are while efficiency gain and the same store sales operating leverage is positive to that Andrew.

Speaker Change: This will be a positive driver for the rest of <unk>.

Michelle Cheng: So just wondering, for the rest of the quarter, how should we think about the good performance in first quarter to carry on the Pizza Hut? Thank you very much. Thank you, Michelle.

Speaker Change: So just wondering is that going for the rest of the quarter, how should we think about the.

Speaker Change: The <unk> first quarter two caveat on the Pizza hut. Thank you very much.

Adrian Ding: Yeah, if, if it is okay with you, let me take this chance to actually address the question for both Pizza Hut and KFC and the group as a whole. Obviously, in terms of SSSG, because your question, you know, brings down to two parts. One is the top line, one is the margins. I'll speak of the top line first. In terms of SSSG, the market environment is still quite evolving and complex. Consumers stay rational. And as Joey mentioned, while we have not observed any significant negative impact on business to date, we continue to be watchful for the development.

Michelle: Thank you Michelle.

Speaker Change: Yes.

Speaker Change: If it's okay with you let me take this chance to actually address the question for both Pizza Hut KFC and the group as a whole.

Speaker Change: Obviously in terms of SSG.

Speaker Change: Question.

Speaker Change: Brings down to two part one is top line one is the margins I'll speak up the top line first.

Speaker Change: In terms of assets on.

Speaker Change: The market environment is still quite evolving and complex.

Speaker Change: Sumer stay rational.

Joey Wat: And as Joey mentioned, while we have not observed any significant negative impact on our business to date will continue to be watchful for the development.

Adrian Ding: And April trading is generally in line with our expectation. But it's worth noting that for the month of June, we have a tougher lapping for that month. So overall, for quarter two, we're striving to achieve a 10 consecutive quarters of positive same-store transaction growth. But amid the uncertain market conditions, we remain cautious about the potential fluctuations in same-store sales index. And this comment is actually true for both KFC and Pizza Hut.

Speaker Change: And April trading is generally in line with our expectation.

Joey Wat: But it's worth noting that for the month of June we have a tougher lapping about months.

Joey Wat: So overall for quarter two were striving to achieve a 10 consecutive quarters of positive positive same store transaction growth.

Joey Wat: With the uncertain market conditions, we remain cautious about the potential fluctuations in same store sales index and this comment is actually true for both KFC and Pizza hut.

Adrian Ding: And now comes down to margin, right? Specific to Pizza Hut, indeed, the Pizza Hut All-You-Can-Eat campaign that took place in quarter one last year was shifted to quarter two this year. So there is a quarterly shifting on the margins. But broadly speaking, in terms of the margin outlook for the two brands respectively, I would say there was no change to our 2025 four-year guidance on margin. You know, we expect the quality margin for the group as a whole to stay either steady or slightly improved, right? That's our guidance provided three months ago. And by brand specifically, we expect the restaurant margin for KFC to be healthy and stable year over year in this year and also over the mid to long run.

Joey Wat: And now it comes down to margin rates specific to pizza hut indeed.

Joey Wat: Indeed, the pizza hut can you can pain that took place in quarter one last year.

Joey Wat: Was shifted to quarter two this year. So there is.

Joey Wat: There is a quarterly shifting on our margins.

Joey Wat: But broadly speaking in terms of the margin.

Joey Wat: For the two brands respectively.

Joey Wat: I would say there was no change to our current 25% full year guidance on margin.

Joey Wat: We expect the core op margin for the group as a whole to stay either steady or slightly improve right. That's our guidance provided three months ago and by brand specifically, we expect our restaurant margin for KFC to be healthy and stable year over year in this year and also over the mid to long run and for Pizza hut margin to slightly in.

Adrian Ding: And for Pizza Hut's margin to slightly improve this year and for mid to long run, hopefully the restaurant margin for Pizza Hut will improve in a figure magnitude And on the top line, you know, the top line is obviously a very important factor, you know, deciding on the restaurant margin. We reaffirm our guidance for the top-line growth, which is the mid-single-digit growth in the system sales.

Joey Wat: Through this year and for mid to long run hopefully the restaurant margin for Pizza hut will improve in a bigger magnitude compared to this year.

And on the top line the top clients opt to be obviously, a very important factor.

Joey Wat: Starting on the restaurant margin.

Joey Wat: We reaffirm our guidance for the top line growth, which is a mid single digit growth in the system sales.

Adrian Ding: And then I would also like to take this opportunity to provide some more color on the line-by-line margin outlook, right? For COS, as I mentioned, there is a quarterly shifting for Pizza Hut's Oil Can Eat campaign. But more broadly speaking, for COS as a whole, we expect modest improvement year-over-year, this year over last year, mainly driven by the benefits of Project Red Eye and deflation. And we'll continue to look to return much of the benefits to our consumers, to continue offering great value for money to our consumers. And breaking down into these two brands, you know, specifically, we expect the COS for KFC to be remain in the range of 31% to 32% for the full year, and for Pizza Hut to be in the range of 32% to 33% for the full year.

Joey Wat: And then I would also like to take this opportunity to provide some more color on the line by line our margin outlook.

Speaker Change: As I mentioned, there is a quarterly shifting for pizza have oil can you can paint.

Speaker Change: More broadly speaking for us as a whole we expect modest improvement year over year. This year over last year, mainly driven by the benefits of project Red and deflation and.

Speaker Change: And we'll continue to look to return much of the benefits to our consumers will continue offering great value for money to our consumers.

Speaker Change: Breaking down into these two brands specifically.

Speaker Change: Specifically, we expect our U S forecast fee to be remain in the range of 31% to 32% for the full year.

And for Pizza hut to be in the range of 32% to 33% for the full year and again both of us.

Adrian Ding: And again, both this percentage will have a modest improvement year over year, this year over last year.

Speaker Change: As a percentage have will have a modest impact a modest.

Speaker Change: A modest improvement year over year this year over last year.

Adrian Ding: For COL, you know, as mentioned in the previous early release, we faced some headwinds on the COL front, particularly, you know, because of the increase in delivery mix. Although the delivery cost per order decreased this year, but driven by the increase in delivery mix, the overall rider cost as percentage of sales will increase for the group and for the two brands this year. And we'll make all efforts to try to offset the wage inflation, which is kind of the non-delivery part, by the efficiency gain, by the simplification, automation, and centralization. So try to keep the non-delivery part of cost of labor to be stable year over year.

Speaker Change: For C O L.

Speaker Change: As mentioned in the previous earning release, we faced some headwinds on the steel front, particularly because of the increase in delivery mix.

Speaker Change: Although the delivery cost per order decreased this year.

Speaker Change: Driven by the increase in delivery mix. The overall rider costs as percentage of sales will increase for the group and for the two brands this year.

Speaker Change: We will make all efforts to try to offset the wage inflation, which is kind of the non delivery part.

The efficiency gained by the simplification automation and centralization, so try to keep the non delivery part of cost of labor to be stable year over year.

Adrian Ding: And then comes to occupancy and other costs. As percent of sales, that line item is likely to be stable. And we continue to explore optimization opportunities to offset the cost increases within that line item.

Speaker Change: And then comes to occupancy and other costs as a percentage of sales that line item is likely to stay stable and we continue to explore optimization opportunities to offset the cost increases within that line item.

Adrian Ding: And I think it's very important to note, and as you also alluded to in the question, there is a quarterly phasing for the margin. We expect tougher year-over-year comparison on both the restaurant margin and operating profit margin later in the year. And this is because more meaningful benefits started to trickle in for Project Fresh Eye from quarter two of last year and from Project Red Eye from second half of last year. And obviously the tailwinds from the favorable commodity prices will be narrowing in the second half of this year as well. And lastly, a couple of, you know, items, the interest income will obviously be lower as a result of the lower cash balance, given we significantly step up our shareholder return.

Speaker Change: And I think it's very important to note and as you also alluded to in the question. There is a quarterly phasing for.

Speaker Change: For the margin.

Speaker Change: We expect tougher year over year comparisons.

Speaker Change: Both the restaurant margin and operating profit margin at later in the year and this is because more meaningful benefits started to trickle in for project fresh eye from quarter two of last year and from positive project Red eye from second half of last year.

Speaker Change: And obviously the tailwind from the favorable commodity prices will be narrowing in the second half of this year as well.

Speaker Change: And lastly, a couple of.

Speaker Change: Items of interest income will obviously be lower as a result of the lower cash balance.

Speaker Change: Given we have significantly stepped up at our shareholder return.

Adrian Ding: And also, there may be some headwind on foreign exchange rates. And, you know, I guess one last item is the market equity investment impact on Meituan. That's the volatile quarter over quarter and year over year. So overall, we maintain our, we maintain and reaffirm our annual guidance on margin and our top line. And then, you know, in terms of the line by line color, that's as I described. Thank you, Michelle. Thank you, Adrian, for the very detailed line by line explanation. Thank you.

Speaker Change: And also there may be some headwind on foreign exchange rates.

Speaker Change: And I guess, one last item is the mark to market equity investment impact on May 20 <unk>.

Speaker Change: Volatile quarter over quarter and year over year. So overall, we maintain our we maintain and reaffirm our annual guidance on margin on our topline.

Michelle: And then in terms of that line by line color. That's awesome disliked thank you Michelle.

Speaker Change: Thank you Adrian for the very detailed line by line for the nation.

Brian Bittner: We'll now move on to our next question. Our next question comes from the line of Brian Bittner from Oppenheimer & Co. Please go ahead, your line is open. Thank you. Hi.

Speaker Change: Thank you, we'll now move onto our next question.

Speaker Change: Our next question comes from the line of Brian Bittner from Ethan Hymer NK Cleantech.

Speaker Change: Thank you.

Brian Bittner: Just for your investors outside of China, can you just maybe talk more about the consumer environment in China and how it's evolving so far in 2025? Are you seeing any positive indicators of maybe a potential inflection moving forward in the consumer?

Speaker Change: Hi.

Speaker Change: Just for your investors outside of China can you just maybe talk more about the consumer environment in China, and how it's evolving so far in 2025 are you seeing any positive indicators of maybe a potential inflection moving forward in the consumer and separately just.

Brian Bittner: And separately, I want to address the transaction growth, particularly at KFC. It's been very solid, transaction growth up 4% in the first quarter. Can you help us understand how this compares to the industry? What is the industry transactions looking like so we can understand how much market share KFC is? Thank you. Thank you, Brian.

Speaker Change: To address the transaction growth, particularly at KFC, it's been very solid transaction growth up 4% in the first quarter can you help us understand how this compares to the industry.

Speaker Change: What is the industry transactions working like so we can understand how much market share to take.

Speaker Change: Recently, thank you.

Brian: Thank you Brian.

Joey Wat: Let me start with the consumer sentiment. We have not seen sort of very different consumer sentiment change so far, but if I could make some general comment of the consumer preference, and that's sort of reflecting our number is the preference towards sort of the wider price range and product with even better entry price and still very innovative food. So that is still working for us, and therefore, you know, you can see our transactions are growing very nicely, both in terms of our food business and drink business. So the food business is the preferred, and then the delivery business as well.

Brian: Let me start with the consumer sentiment.

Brian: Have not seen.

It's a very different consumer sentiment.

Brian: Change so far.

Brian: But if I can make some general comments on the consumer.

Brian: Consumer preference and thats sort of reflecting in our number is.

Brian: <unk> to us.

Brian: Sort of the wider price range and more in product with the with even better entry price and still very in the latest food.

Brian: So that is still working for us and therefore, you know you can see all our transactions are growing very nicely both in terms of our.

Brian: Food business entering business.

Brian: So the fruit business is the process.

Brian: And then the delivery business as well and we have.

Joey Wat: We have captured very nice incremental sales from lower delivery order, particularly in lower tier cities. So that helps a lot because the delivery transaction for KFC, the TZ growth actually is 24%, while the delivery sales is 13%. A similar trend in Pizza Hut, while the Pizza Hut also achieved 13% growth in delivery, the transaction growth for the sort of lower TA, about 30 to 60 TA, is actually over 50% growth. So that gives you a sense of where we are going. And also in terms of drinks, I just want to quote you one number, our K coffee, so the coffee that we sell in all our KFC store, the increase of cups and sales is actually 20%.

Brian: Capture very nice incremental sales from lower delivery order, particularly in logistics.

Brian: So if that helps or not.

Brian: Because the.

The delivery.

Speaker Change: Lou Reed transaction for KFC, the PC growth actually is 24% while the delivery sales is 13%.

Speaker Change: A similar trend in pizza hut, while the Pizza hut also achieved 13% growth in delivery that transaction growth for the.

Speaker Change: Lower.

Speaker Change: T a about 30% to 60 Ta is actually also 52% growth.

Speaker Change: So that gives you a sense.

Speaker Change: Of where we are going and also in terms of strength I just want to quote you one number our K coffee and the coffee that we sell in all our KFC store.

Speaker Change: Increase of Cups, and south is actually 20%.

Joey Wat: So that is sort of overall direction. And I think we see sort of similar trend in the industry. But I'm happy to report in both KFC and Pizza Hut, based on our limited information, because it's a very fragmented market in a way, we see some meaningful increase of our market share, particularly in the delivery business. So I hope that gives you a sense about where things are.

Speaker Change: So that is all of our overall overall direction and I think you know.

Speaker Change: We see sort of similar trend in the industry.

Speaker Change: But I'm happy to report in both KFC and Pizza hut are based on our.

Speaker Change: Limit inflammation, because you know.

Speaker Change: It's a very fragmented market in a way.

Speaker Change: We see some meaningful increase of our market share, particularly in the luxury business.

Speaker Change: So so I hope that gives you a sense about where things are going forward.

Joey Wat: And going forward, we still stick to our focus, dual focus, one is innovation. That means innovations in food, in everything we do, and then operational efficiency, and that's where we get our margin from and supporting the innovation.

Speaker Change: We still stick to our focus.

Speaker Change: Focus one is innovation that means innovation innovations in food.

Speaker Change: In everything we do.

Speaker Change: And then operational efficiency.

Speaker Change: And Thats, where we get our margin from and supporting the innovation.

Joey Wat: Ah, one last interesting introduction of the innovation. Look at our tea coffee business. Not only coffee, we're actually moving to tea as well. So I hope that give you a flavor of where things are, Brian. Thank you. It does. Thank you, Joey. Thank you.

Speaker Change: One last.

Speaker Change: Interesting introduction of the innovation looked at our coffee business.

Speaker Change: Not only coffee, we're actually moving to tier one.

Speaker Change: So I hope that gives you a flavor of where things are Brian. Thank you.

Brian: It does thank you Joey.

Chen Luo: We'll now move on to our next question. Our next question comes from the line of Chen Luo from Bank of America. Please go ahead. Your line is open. Hello. Hi. Yes. Oh, hi. Hi, Joey and Adrian. This is Luo Chen from Bank of America. First, congrats on the same social growth turning flattish in Q1.

Speaker Change: Okay. Thank you.

Brian: Now move onto our next question.

Speaker Change: Our next question comes from the line of Chen Luo from Bank of America. Please go ahead. Your line is open.

Brian: Okay.

Brian: Hello.

Brian: Hi.

Brian: Yes.

Brian: Hi, Julienne Adrienne this.

From Bank of America first congrats.

Speaker Change: Same store test growth kind of flattish in Q1, and just also here.

Chen Luo: And just now I also hear mentioned Diu Ren Ge, and it happens that my daughter is a big fan of Diu Ren Ge, so that actually means me. Yeah, so my question is regarding the new store expansion, and in our earnings announcement, I noticed that new store contribute around 4% revenue growth, despite around 11% new store young year growth. And last quarter in Q4 last year, the new unit growth also contributed only roughly around 5% revenue growth. So if we do the math, if we compare the revenue growth from new stores. divided by the new store expansion pace.

Brian: Mention.

Brian: Semi towards great Big Fab, given does that actually mean.

Brian: Okay.

Brian: Yes.

Brian: It's regarding the.

Brian: New store expansion.

Brian: And in our earnings announcement, I notice that used to contribute around 4%.

Brian: Revenue growth.

Brian: Despite around 11% <unk>.

Brian: <unk> year on year growth.

Brian: And last quarter in Q4 last year.

Brian: The.

Brian: New unit growth also contributed only roughly around 5% revenue growth.

Brian: So if you do the math, if we compare the <unk>.

Brian: Revenue growth from new stores.

Brian: Divided by.

Brian: The new store expansion pace. So this keeps you investigate around 40% solvency ratio.

Chen Luo: So this gives you roughly around 40% something ratio. I understand that. We tend to open smaller and smaller stores. And I guess this could represent the long-term trend in the future.

Brian: I understand.

Brian: We tend to be smaller and smaller stores.

Brian: And I guess this could represent a long term trend in the future is it fair to say that in the foreseeable future because of our mix shift towards the smaller stores.

Adrian Ding: Is it fair to say that in the foreseeable future, because of our next shift towards a smaller world, For around 10 to 11% new store expansion, we can only expect around four or at best 5% something revenue growth from new stores because of the dilutions of the smaller new stores opened. That's my question, thank you. Thank you, Luo Chen.

Brian: Around 10% New store expansion, we can only expect a wrong for best 5% subsea revenue growth from new stores because of the dilution of the small nose use stores opened that's my question. Thank you.

Lauren: Thank you Lauren.

Adrian Ding: Yeah, let me address the question quite directly. I think for this year, as we mentioned in the prepared remark, you know, in terms of the growth rate in our top line, we do expect the system sales growth to be in the mid single digit range. So that's a reaffirmation of our guidance. And we target to open, you know, 1600 to 1800 new stores. And obviously, there's some timing, quarterly timing shifts for the menu open this quarter versus the rest of the quarter of the year. And then specific to a question on the 4% of net new unit contribution to the top line.

Brian: Yes, let me address the question.

Brian: Quite directly.

Brian: For this year as we mentioned in the prepared remarks.

Brian: In terms of the growth rate in our top line.

Brian: We do expect the system sales growth to be in the mid single digit range.

Brian: So thats a reaffirmation of our guidance.

Brian: We target to open 600 to 800 net new stores and then obviously there was some timing quarterly timing shifts for the venue opened this quarter versus the rest of quarter of the year.

Brian: And then specific to your question on the 4% of net new unit contribution to the topline.

Adrian Ding: You know, you mentioned the 10% of net new store increase as percentage. But obviously that's the end of the quarter store count. And, you know, even with all at the end of store, end of quarter store count, both way the same. The store week, when we open or close the store within the quarter is actually a very important factor as well. So, you know, the end of the quarter store count only tells one side of the story. And then, you know, obviously on a 4% net new unit contribution, you know, we are opening smaller stores as we expand into lower tier cities.

Brian: You mentioned, the 10% of net new store increase as a percentage.

Brian: But obviously, that's the end of the quarter store count.

Brian: <unk>.

Brian: With <unk> at the end of store end of quarter store count grow.

Brian: <unk> raised the same store week, when we open or close to slow within the quarter is actually a very important factor as well. So you know at the end of the quarter store count only one side of the story.

Brian: And then obviously on a 4% that you would've contribution.

Brian: We are opening smaller stores.

Brian: We expand into lower tier cities.

Adrian Ding: Around 70 to 80% of our new stores in this quarter are smaller stores. That's opening this quarter are smaller stores. And we got it to the market previously in the previous earnings release. New store sales are around 50% to 60% of our mature stores in terms of the weekly sales. And there's a ramp up period for the new store sales, too. We mentioned previously that normally three years of ramp up period when the new store gets to a mature store. And importantly, our new store remain very healthy, and maintain very healthy payback periods and profitability.

Brian: Around 70% to 80% of our new stores in this quarter, a smaller stores that are opening this quarter our smallest dwarfs.

Brian: And as we guided to the market previously in the previous earning release new store sales.

Brian: Around 50% to 60% of our mature towards it comes out the weekly sales and there is a ramp up period for the new store sales too.

Brian: We mentioned previously and Thats normally three years of ramp up periods, when the new store test to a mature store.

Brian: And importantly, our new store remain very healthy and maintained very healthy payback periods unprofitability.

Adrian Ding: Specific to this quarter, right, in addition to the smaller store factor, this quarter we strategically closed more stores to enhance the strength of our overall store portfolio, as we mentioned in the prepared remarks. And the net new store open figure will normalize as the year progresses. So that's more of this year. But speaking of mid to long run, if we open, let's say, 10%, 11%, 12% of new stores in the quarter end figure, what's the system sales growth rate? Would that be single digit, or low single digit, or high single digit? I guess the store week and the smaller store is one aspect of the algorithm.

Brian: Specific to this quarter. In addition to these smaller store factor.

Brian: This quarter, we strategically sold with more stores to enhance the strength of our overall store portfolio as we mentioned in the prepared remarks.

Brian: And the net new store net new store open figure will normalize as the year progresses.

Brian: So that's a more this year right, but speaking up mid to long run.

Brian: If we open let's say 10, 11, and 12% of our menu.

Brian: Stores.

Brian: And figure out what's the system sales growth rates would that be mid single digit or low single digit or high single digits I guess, the store week and it's more of a store that's one side.

Brian: Aspects of <unk>.

Adrian Ding: The other important aspect is the same for sales growth. And as we mentioned just now, we remain cautious on the near term, especially this year, same store sales index. There may be some fluctuations there. In the mid to long run, obviously, we don't have the crystal ball. We'll control things within our control and continue to deliver excellent value for money for consumers. And then if we can have some benefits in the mid to long run, same store sales growth, that will benefit the top line system sales as well.

Brian: The algorithm the other aspect important aspect is the same store sales growth and as we mentioned just now.

Brian: We remain cautious on the near term, especially at this year's same store sales index.

Speaker Change: May be some fluctuations there.

Speaker Change: In the mid to long run obviously, we don't have the Crystal ball will control things within our control and continue to deliver excellent value for money for consumers and then we can have some benefits in the mid to long run of same store sales growth that will benefit the top line system sales as well.

Chen Luo: Luo Cheng, hopefully that'll address your question. Thank you. That's very helpful.

Speaker Change: Hopefully that addressed your question. Thank you.

Speaker Change: So thank you that's very helpful. I also look forward for more cooperation with more IP because my daughter.

Chen Luo: I also look forward for your more cooperation with more IPs, because my daughter is a big fan of all different kinds of IPs. Thank you. The IPs are super to offer emotional values for young people, which is as important as the value. sort of in a physical world, you know, the virtual world, physical world, we have to take care of both these days. Yeah, totally agree. Thank you.

Speaker Change: <unk>. Thank you.

Speaker Change: Yes.

Speaker Change: The Ips are super to offer emotional values for young people, which is as important as valuable.

Speaker Change: Sort of in a physical well you know the virtual world physical well, we have to take care of both these days.

Speaker Change: Yes totally that quick.

Speaker Change: Yes.

Speaker Change: Thank you.

Speaker Change: Thank you. Thank you.

Christine Peng: We'll now move on to our next question.

Speaker Change: Thank you.

Speaker Change: We'll now move onto our next question.

Christine Peng: Our next question comes from the line of Christine Peng from UBS. Please go ahead, your line is open. Hello, thank you for the opportunity to have the question. So my question is about the key coffee. So Joey, you mentioned that the this year, you plan to open 200 more key coffee stores than your initial target.

Speaker Change: Our next question comes from the line of Christine Peng from UBS. Please go ahead. Your line is open.

Speaker Change: Yes.

Speaker Change: Hello, Thank you for the opportunity to have the question. So my question is about the key coffee. So Joe you mentioned that the dose you plan to open 200 or more.

Speaker Change: K coffee store thing your initial target. So can you share us more long term view towards this key coffee and I was also wondering whats the impact.

Joey Wat: So can you share a small, long term view towards this key coffee? And I was also wondering what's the impact on the KFC store economics by opening key coffee side by side? Thank you, Christine. In the long term, we are committed to the k-coffee business and particularly the k-cafe business because we see very promising growth momentum of this particular business. Right now, our target is 1,500 cafe by end of 2025, 200 more. And we only started last year. And the most promising bit is huge, huge percentage of our members have yet tried the cake coffee.

Speaker Change: The KFC store economics by opening key coffee side by side.

Speaker Change: Thank you Christine in the long term.

Speaker Change: <unk> committed to their K coffee business, and particularly to take coffee business.

Speaker Change: Because we see Gary.

Speaker Change: I'm missing.

Speaker Change: Growth momentum of this particular business.

Speaker Change: Right now.

Speaker Change: Our target is 1500 cafe buy and only 25 to 100 more and we only started last year.

Speaker Change: And the most promising.

Speaker Change: Huge huge percentage of our members have yet try the K coffee.

Joey Wat: And that is fantastic base. And in terms of the top line and bottom line, the top line is very nice addition, additional single sales growth for the stores with the K Coffee Cafe. I mean, it's still sort of low single digit, but it's very nice to that particular store. And then in terms of bottom line, because we share the equipment, we share the location, we share the cost of labor, so the bottom line is very protected as well. So these two are both very important to our business as well.

Speaker Change: And that is fantastic base.

Speaker Change: And in terms of the.

Speaker Change: Topline and bottom line.

Speaker Change: The top line.

Speaker Change: Is very nice addition, additional same store sales growth.

Speaker Change: For the stores with the K coffee coffee.

Speaker Change: I mean.

Speaker Change: <unk> is still sort of low single digit, but it's very nice.

Speaker Change: To that particular store and then in terms of bottom line because we share.

Speaker Change: The equipment, we share their location.

Speaker Change: Sure the cost of labor so the bottom line.

Speaker Change: Is a very protected as well so so these two apples every quarter until our business as well.

Joey Wat: And if I could comment on the third bit, which is the business, the menu, the ambience, and the menu include the food and drink, we are making very good progress. And although we only start to open the K Coffee Cafe last year, but in 2024 alone, we launched 52 coffee, drink, or food item. And we already have some very nice signature product like the sparkling coffee, like a gigantic egg tart, and some really quirky. The quirky is the right word to describe this product, original recipe chicken latte. It's a bit challenging in terms of name, but I can assure you that the taste is really quite good.

Speaker Change: And if I could comment on the sub debt, which is the business.

Speaker Change: The menu and beyond.

Speaker Change: And the men include a fluid entering.

Speaker Change: We are making very good progress, although we only start to open the K coffee coffee last year.

Speaker Change: But in 2020 full alone we launched 52 coffee drink a food item and we already have some very nice signature product like the sparkling coffee like a gigantic eight cat and and and and some weaker key.

Speaker Change: Cook is the right word to describe this protocol original recipe chicken latte.

Speaker Change: It's a bit challenging into some name, but I can assure you that the taste is really quite good.

Joey Wat: And then this year, we are moving on to introduce a more premium Geisha beans for just 12.9 RMB. So the product itself are getting into the mindset of the customer. And as I mentioned earlier, we even start to launch the matcha drink. And as of right now, we sell longjing, the tea leaf longjing with latte as well. So we are committed, and we are very positive about this K Coffee Cafe. Not only it drive the uplift in top line, but it also drive incremental profit. Thank you, Christine. Thank you, Joey. Thank you.

Speaker Change: And then this year, we are moving on to introduce a more premium gauge athene for just $12 nine on beech.

Speaker Change: So the product itself.

Speaker Change: Getting into.

Speaker Change: Into the mindset of the customer and as I mentioned earlier, we even start to launch into the much factoring in as of right now we sell you're losing.

Speaker Change: Well, the tea leaf imaging with latte as well Oh. So so we are committed and we are very positive about our about this K coffee cafe and not only drive the uplift.

Speaker Change: Bliss in top line, but also drive incremental profit. Thank you Christine.

Thank you Julie.

Sijie Lin: We'll now move on to our next question.

Speaker Change: Thank you we will now.

Speaker Change: Now move onto our next question.

Sijie Lin: Our next question comes from the line of Sijie Lin from CICC. Please go ahead, your line is open. Hi. Thank you, Joey and Adrian. I have one question. So, we are doing good on new product, new store model, high operational efficiency, and we are also doing good on brand marketing. But regarding the brand marketing, maybe there are some new trends in the market. For example, some are focusing on healthiness, some are focusing on the emotional value, which I'll talk about that. For example, choosing like brand ambassadors, joint brands, IP toys that are popular among consumers.

Speaker Change: Yes.

Speaker Change: Our next question comes from the line of Cte Lin from CIC. Please go ahead. Your line is open.

Cte Lin: Hi, Thank you Jerry and Nathan I have one question. So we are doing good on new product new store model our.

Speaker Change: High operational efficiency.

Speaker Change: We're also doing good on brand marketing, but regarding the brand marketing maybe there are some new trends in the market. For example, some all focusing on here Dennis some of focusing on the emotional value, which I'll talk about that.

Speaker Change: For example, choosing like brand ambassadors joined brands IP toys that are popular among consumers.

Sijie Lin: And maybe some are connecting the brand promotion with product innovation.

Speaker Change: And maybe some more connecting the brand promotion with protecting innovation.

Joey Wat: So, do we have any new observations and evolving plans regarding this aspect regarding the brand marketing? Could you talk more about this? Thank you. Thank you, Sijie.

Speaker Change: So do we have any new observations and involving plans regarding this aspect regarding the brand marketing could you talk about more about this thank you.

Joey Wat: I'll try to respond to your question in two ways. One is our strength in brand marketing certainly is shown through our ability to market fried chicken or pizza brand almost as a bit of fashionable brand. You know, we always stay in touch with our consumers in terms of their preferred IP and something relevant to them and we would like to believe that we grow with them, grow up with them or we grow with them period. So we'll continue to do that and it seems that we've been doing it reasonably successfully. And then you also asked about other trends in terms of healthy food, et cetera, et cetera.

Speaker Change: Thank you.

Speaker Change: Yeah.

Speaker Change: Tried to respond to your question in two ways one is.

Speaker Change: Our strength in brand marketing.

Speaker Change: So to me as shown through our ability to market fried chicken or pizza brand almost as typical fashion I hope the whole brand.

Speaker Change: We always stay in touch with our consumers in terms of that piece of IP and something relevant to them and we will like to believe that we grow with them to grow up with them already.

Speaker Change: I'm curious so we'll continue to do that as soon as they would be doing it.

Speaker Change: Use of Hff's funny.

Speaker Change: And then you also asked about auto.

Speaker Change: The trend in terms of healthy food et cetera, et cetera, well I mean, we plan to introduce this concept to our investors and and all of you guys in our Investor day. So please so just to get a chance to make it.

Joey Wat: Well, I mean, we plan to introduce this concept to our investor and all of you guys in our investor day. So please, I'll just take a chance to make an advertisement for that. It's a module called K-Pro. And some of you guys have already tried a product. So what is K-Pro? It's a module. Again, we continue to share the KFC store space and membership and equipment, everything. Why sharing? Because the incremental investment is very light. And we have some of these stores in Beijing and Shanghai in particular. And the menu is very different. So very focused means very short manual there, particularly focused on energy bowls and smoothies.

Speaker Change: Advertisement for that.

Speaker Change: Is that is the module is the module called Petro and some of you guys have already tried a product. So so what is capable is that it's a module again.

Speaker Change: We continue to share the KFC store space and membership and equipment everything.

Speaker Change: You know why sharing because the incremental investment is very light.

Speaker Change: And we have some of these stores in Beijing and Shanghai in particular.

Speaker Change: The menu is very different and that.

Speaker Change: So very focused it means very short menu there.

Speaker Change: Particularly focus on energy bowls and smoothies.

Joey Wat: So what we call this is the lighter meals. And these consumers or customers, they're also our KFC members, but we just serve them with slightly different food. And so far, we really like what we have seen in both Shanghai and Beijing. Actually, there's some store in Shenzhen as well. So if you cross the border from Hong Kong in Shenzhen, you can try the product. I mean, I like it myself very much, and so as our KFC members. So we do try to offer slightly different food to our customers and it's hard to just talk about a new concept without trying the food and without you guys seeing how it works.

Speaker Change: So what we call. This is the lighter meals and the consumer as a customer yeah, yeah yeah.

Speaker Change: They also all KFC Memphis, the weakest serve them with slightly different food.

Speaker Change: And so far we like what we have seen.

Speaker Change: In both Shanghai, and Beijing actually there's some store in Shenzhen as well if you cross the border from Hong Kong is something you can try the product.

Speaker Change: I mean, I like get myself very much Anne.

Speaker Change: Yes.

Speaker Change: All KFC members.

Speaker Change: So we do try to offer.

Speaker Change: Totally different.

Speaker Change: Customers and it's hard to just talk about the new concept without trying to fool around with all you guys seeing high. It was so we're looking forward to feel more of their stores.

Joey Wat: So we're looking forward to build more of these stores, particularly in tier one and tier two cities.

Speaker Change: Typically in tier one tier two cities and then hopefully we'll have a chance to introduce.

Adrian Ding: And then hopefully we'll have a chance to introduce a wider range of manager you guys when you come to the investor day later on the year. I'll pause here, thank you. Thank you, Joey. Looking forward to the investor day. The new product and new company.

Speaker Change: Full men not for a minute and say a wider range of manager you guys. When you come to the Investor Day later on the year.

Speaker Change: I'll pause here. Thank you.

Speaker Change: Thank you so I am looking forward to the Investor day, the new prototype and new concept. Thank you, yes, and if I can add on the pizza hut, we have amazing.

Adrian Ding: Yeah, and if I can add on the Pizza Hub, we have amazing innovation as well. And last year, we have tried the pizza vow menu and we'll continue to streamline the menu and we continue to work on the menu. Obviously, we will include that in the investor day as well. Thank you.

Speaker Change: And as well and last year, we have tried to Wow pizza menu and we'll continue to streamline the menu and we'll continue to work on their menu of is right. We will include that in the Investor day as well. Thank you.

Speaker Change: Yeah.

Speaker Change: Thank you.

Florence Lip: Due to time constraints, this concludes our question and answer session, so I'll hand the call back to Florence for closing remarks.

Florence: Due to time constraints. This concludes our question and answer session. So I'll hand, the call back to Florence for closing remarks.

Florence Lip: Thank you. Thank you, Joey and Adrian.

Florence: Thank you and thank you Joey and Adrian and this concludes our Q&A session.

Florence Lip: And this concludes our Q&A session.

Florence Lip: Before we end the call, as Joey mentioned, we're going to host our Investor Day later this year. It will be in November in Shenzhen, a Tier 1 city in China. We'll provide more details in due course.

Florence: Before we end the call as Joey mentioned, we're going to host our Investor Day later this year it will be in November in Shenzhen.

Florence: Q1 city in China will provide more details in due course, thank you for joining the call today. Thank you. Thank you.

Operator: Thank you for joining the call today. Thank you. Bye bye.

Florence: Goodbye.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.

Florence: This concludes today's conference call. Thank you for participating you may now disconnect speakers. Please standby.

Florence: Okay.

Florence: [music].

Florence: Yeah.

Florence: [music].

Florence:

Florence: Okay.

Florence: Okay.

Florence: Okay.

Florence: [music].

Florence: Yes.

Florence: Yes.

Florence: [music].