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Yum China (YUMC) Boosts Digital Space, Opens Digital R&D Center

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In a bid to strengthen its digital ecosystem, Yum China Holdings, Inc. (YUMC - Free Report) recently announced the opening of its Digital R&D Center across three sites in Shanghai, Nanjing and Xi'an.

Digital R&D Center focuses on driving operational excellence by means of consolidating and expanding dedicated resources to develop new solutions and services. It also involves using technologies in big data, artificial intelligence, middle office and digital SaaS to drive end-to-end digitalization.

Moreover, it allows the company to boost in-house digital capabilities across various functions like customer experience with reference to membership programs; efficient store operations and decision making; smart delivery in terms of order queuing, trade zones and rider routing; and supply chain management.

Leila Zhang, chief technology officer of Yum China, stated, "We believe the establishment of the Digital R&D Center will significantly strengthen Yum China's internal digital capabilities and support sustainable business growth by using advanced technology for real life applications."

The company stated that it has set aside $1-1.5 billion for investment in the digital and technology space over the next five years. As part of this initiative, the company intends to invest approximately $100-200 million and hire up to 500 staff in the Digital R&D Center to support its business. Also, it intends to cooperate with external partners like scientific research institutions and other industry leaders to implement leading edge technology.

Price Performance

Zacks Investment ResearchImage Source: Zacks Investment Research

Coming to price performance, shares of Yum China have gained 5.8% so far this year compared with the industry’s 9.7% growth. The dismal performance was primarily caused by the coronavirus crisis. Dine-in traffic and sales at transportation locations, remains well below 2019 levels. Although the impacts of COVID-19 are subsiding, the company expects a full recovery of same-store sales to pre-COVID levels to take time. Earnings estimates for 2021 have declined in the past 30 days, depicting analysts’ concern regarding the stock’s growth potential.

Zacks Rank & Other Key Picks

Yum China currently has a Zacks Rank #5 (Strong Sell).

Some other better-ranked stocks in the same space include Denny's Corporation (DENN - Free Report) , Chipotle Mexican Grill, Inc. (CMG - Free Report) and Darden Restaurants, Inc. (DRI - Free Report) . Denny's sports a Zacks Rank #1(Strong Buy) , while Chipotle and Darden carry a Zacks rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Denny's has a three-five year earnings per share growth rate of 9%.

Chipotle's 2021 earnings are expected to increase 138.5%.

Darden has a trailing four-quarter earnings surprise of 15.3%, on average.

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