Yum China Holdings Inc reported a surprise rise in quarterly same-store sales as efforts to turn around its Pizza Hut restaurants start to pay off.
The company's shares jumped 10 percent in U.S. after-hours trading on Wednesday.
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Yum China's same-store sales rose 1 percent in the first quarter. Analysts on average had estimated a fall of 0.7 percent, according to research firm Consensus Metrix.
Yum China, once the primary profit and sales driver for Yum Brands Inc, started trading as a standalone company on Nov. 1.
Same-store sales in the Pizza Hut casual dining business rose 2 percent, their first rise in over two years.
To turnaround the Pizza Hut business, Yum Brands had hired outside experts to address issues such as delivery times, digital efforts and layouts of some restaurants with large dining areas.
Sales at established KFC restaurants rose 1 percent, helped by increased promotions celebrating the Chinese New Year in January and the 30th anniversary of KFC in China. Analysts had expected a fall of 2.4 percent.
Yum China said it remained confident in its ability to open 550-600 restaurants this year while delivering double-digit growth in operating profit, excluding foreign exchange rates.
Yum China's net income rose 20.7 percent to $175 million, or 44 cents per share, in the quarter ended Feb. 28, helped by increased restaurant margins due to the retail tax structure reform implemented on May 1 in China.
Analysts on average had expected a profit of 38 cents per share, according to Thomson Reuters I/B/E/S.
Total revenue fell 1.5 percent to $1.28 billion, but beat the average analyst estimate of $1.27 billion. (Reporting by Jessica Kuruthukulangara in Bengaluru; Editing by Maju Samuel)