Multinational companies surpass expectations in China's 3rd quarter operations

BEIJING, Nov. 8 (Xinhua) -- Yum China, which runs KFC, Pizza Hut, Taco Bell and other fast-food chains in China, recorded total revenue of 3.07 billion U.S. dollars for the July-September quarter, up 5 percent year on year, Nikkei Asia reported Tuesday.

Meanwhile, its operating profit rose 15 percent to 371 million dollars, pushing the operating margin up by a full point to 12.1 percent, and net profit was up 22 percent year on year to 297 million dollars, according to the report.

Anne Ling, a Hong Kong-based analyst at Jefferies Group, said the quarterly sales "were in line" while the operating profit "beat market and our estimates."

Adrian Ding, Yum's acting chief financial officer, called a recent string of stimulus measures by Chinese authorities "quite encouraging." "Obviously, it will take time to influence consumer behavior and impact business like ours," said Ding.

Moreover, to cope with the headwinds, the company has been expanding its footprint rapidly by introducing new cheaper store models to capture cost-conscious consumers.

The number of new stores increased by 438 in the third quarter to 15,861 with 11,283 KFCs and 3,606 Pizza Huts.

The store count of Kcoffee -- a cafe chain set up side by side with existing KFCs to minimize costs -- reached 500 outlets. It serves a 9.9 yuan (1.4 dollars) combo of coffee and a hot dog, along with other "value for money" offerings. Pizza Hut Wow, a more affordable version of the classic pizza chain, reached 150 stores in less than half a year.

Yum CEO Joey Wat described the two new chains as "breakthrough business models," which have "enabled us to broaden our addressable market and capture new customer demand."

Canadian sportswear magnate Lululemon in China has picked up momentum in sales in the third quarter, following a slowdown in the second quarter, according to a BofA Securities analyst cited by Yahoo News.

Data released by Meritco Services shows that Lululemon's China sales increased 48 percent in August and 67 percent in September, with a 98.4 percent correlation to reported sales, marking a significant rebound from the second quarter.

Lululemon has long regarded China as a significant growth opportunity, and this positive trend reinforces their confidence in its diverse growth avenues, said the analyst.

Lululemon's long-term plan aims for a fourfold increase in international revenue by 2026, with China as a key component of this growth trajectory, the analyst added.

The sports brand is looking beyond China's big urban centers for growth, as it "bets on the country's growing middle class" to counter a slowdown in the United States, according to a report by Bloomberg.

"There is still a lot of untapped opportunity in China. If you go to second-tier and third-tier cities, it's vastly different," said San Yan Ng, Lululemon's country managing director.

"Chinese customers care more about experience," said Ng, adding that it's no longer about buying a T-shirt for the sake of the T-shirt. There's a "shift from material goods to experience."