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Yum China Holdings, Inc. (YUMC Quick QuoteYUMC – Free Report) is likely to benefit from its digital initiatives, unit expansion and menu innovation efforts. However, coronavirus-induced soft traffic and inflationary pressures are headwinds.
Let us discuss the factors highlighting why investors should retain the stock for the time being.
Catalysts
Yum China is capitalizing on the benefits of its technology. The company is increasingly shifting toward digital and content marketing to expand its customer base. It has adopted a high-grade delivery strategy that includes collaborations with aggregators to source traffic and fulfills orders by the company’s KFC riders. Digital orders during third-quarter 2022 contributed 91% to KFC and Pizza Hut’s company sales. During the quarter, the company’s delivery contributed nearly 38% to KFC and Pizza Hut’s company sales, up nearly four percentage points from the prior-year quarter’s levels. Coming to loyalty membership, Yum Brands created a robust loyalty program with more than 400 million members cumulatively. Pizza Hut’s membership increased by 100 million members. In the third quarter, member sales accounted for nearly 60% of system sales.
The company focuses on the digital R&D Center to drive operational excellence through consolidating and expanding dedicated resources to develop solutions and services. This involves using technologies in big data, artificial intelligence, middle office and digital SaaS to drive end-to-end digitalization. During the third quarter of 2022, the company emphasized on maximizing delivery coverage and flexibility using AI technology. To this end, the company launched Smart Delivery to adjust delivery coverage for each store. The initiative paved a path for better customer coverage and efficient service offerings. The company stated that it has set aside $1-1.5 billion for investment in the digital and technology space over the next five years.
Yum China is…
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