Catering industry has a weaker-than-expected recovery in Q2 amid COVID-19, financial reports show
Published: Jul 30, 2020 09:53 PM

A man shows McDonald's limited-edition Szechuan Flavored Dipping Sauce at a store in Hangzhou, capital of East China's Zhejiang Province on Wednesday. The sauce will be served at McDonald's stores in the Chinese mainland in a flash sale since Wednesday, media reports said. Reportedly, one small sachet of the sauce once sold for over $50,000 on eBay. Photo: IC


Quarterly results from major catering chains showed that the recovery in the second quarter is weaker than expected as the impact of the coronavirus lingers.    

Yum China, the operator of KFC, Pizza Hut and Taco Bell restaurants in China released its total revenues for the second quarter on Wednesday.

Although second quarter operations improved with 168 new openings, the lingering effect of COVID-19 continues to impact operations, the report said.

The company reported $1.9 billion in revenue in the second quarter, down 11 percent year-on-year and $132 million in net income, down 26 percent from same period of 2019. Same-store sales declined 11 percent, with a 10 percent decline at KFC and 12 percent decline at Pizza Hut.

Sales softened in June impacted by reduced traffic at transportation and tourist locations, and resurging regional infections.

"These impacts, together with the lingering effects of the COVID-19 outbreak, will continue to put pressure on our sales and operations in the third quarter," Andy Yeung, CFO of Yum China said in a statement.

Its main rival McDonald's also reported continued negative sales in China, according to a financial report released on Tuesday.

Global revenue in the second quarter was down 30 percent from last year. Results also reflected continued negative comparable sales in China for the quarter.

As a result of a slump in profits McDonald's announced it will be closing around 200 stores in the US by the end of the year.

US coffee chain Starbucks revealed in a financial statement on Tuesday that the company's sales in China were down 19 percent in the third fiscal quarter ending June compared with the same period last year.

The company reported $4.2 billion in revenue in the fiscal quarter, down from $6.8 billion last year. Quarterly losses amounted to $678 million, exceeding market expectations.

Due to the uncertainties brought about by the pandemic the overall recovery of the catering industry in the second quarter is not as satisfactory, analysts said.

"In the second quarter the catering industry in China fell by 40 percent compared to the same period last year. New outbreaks of COVID-19 in Beijing and Dalian have increased consumer anxiety and impacted the speed of the recovery," Zhu Danpeng, a food industry analyst told the Global Times on Thursday.

The biggest hit is on medium-sized companies saddled with cash flow trouble and supply chain difficulties.

"At present, restaurants can only make up for lost profits through takeout and contactless services," he said.

According to Yum China, delivery and takeout continued to grow and contributed over half of company sales in the second quarter.

Zhu said he believes the catering industry can make up its losses by the end of the year.

"The third quarter is critical. If there are still coronavirus resurgences in the third quarter, the situation in the fourth quarter will be bleak as it is traditionally a party time for colds and flu," he said.