Yum China surges as Chinese regain taste for pizza and fried chicken

Has China regained its taste for pizza and fried chicken?

Shares in Yum China are surging on Tuesday after the company behind KFC and Pizza Hut in China delivered a stronger-than-expected set of first-quarter results.

The company, which was spun out of Yum Brands late last year, reported a 1 per cent rise in like-for-like sales in the three months to the end of February, confounding expectations for a 0.7 per cent decline.

The unexpected gain also fuelled hopes that the company might finally be moving past a 2-year sales slump triggered by a food-safety scare, bird flu outbreak and competition from local restaurants. Shares jumped nearly 12 per cent in after-market trading.

Total revenue came in at $1.28bn, down 2 per cent from the prior year period but ahead of the $1.27bn the market was expecting.

Net income rose by more than a fifth to $175m for the period amid a sharp drop in operating costs. The company operates 7,600 restaurants across China.

“I am very pleased with our performance in the first quarter of 2017, and at Yum China we are facing the future with increasing confidence,” said chief executive Micky Pant. “Both KFC and Pizza Hut Casual Dining delivered positive same-store sales in the first quarter of 2017, with KFC successfully lapping a particularly strong year ago performance.”