“The recent coronavirus outbreaks have caused significant interruptions to our business. The impact comes from temporary closure of our restaurants, as well as a substantial decline in sales to the restaurants that remain open. We started closing some of our restaurants right before the Chinese New Year.
“In recent days, more than 30% of our restaurants were closed. The traffic at the restaurants that remained open were impacted by travel restriction, suspended facilities and shortened operating hours as people avoid going out. For the restaurants that remained open, same-store sales since the Chinese New Year declined by 40% to 50% year-over-year after adjusting for the timing of the Chinese New Year holiday.
“While dining traffic was hard hit, as people avoided public gatherings, delivery is holding up well. To better serve our customer and to protect our employees, we rolled out contactless delivery, which is very well received by our customers. In addition, we also rolled out order online pick up and in-store contactless services and saw some encouraging early results as well.
“However, at this time, we cannot forecast when, nor at what rate the closed restaurant will be reopened and the traffic will be restored. Furthermore, we may be required or otherwise decide to close additional stores or modify our operation in response to the outbreak. The situation is rapidly evolving. While we cannot yet fully ascertain the expected impact. We may experience operating losses for the first quarter of 2020 and if the sales trend continues for the full year of 2020. Future operations, cash flow, and financial position may be materially and adversely influenced by the further development related to the outbreak including potential additional announcements and action from the central and local authorities or other reasons.”
In the words of Up-and-to-the-Right Capital Management: “Does $YUMC really seem like a stock price that’s baked in the health crisis in China? Amazing how everybody is able to keep such a long-term perspective on these things.”