Yum China Holdings (YUMC) stock fell nearly 5% in premarket trading Tuesday after the restaurant operator served up mixed third-quarter results. Earnings beat Wall Street estimates, but revenue fell short of expectations.

Same-store sales declined 3% year over year, thanks to tough comparisons with last year's delivery platform subsidies and some genuinely unhelpful weather in August.

But here's the twist: same-store transactions rose for the 15th consecutive quarter. The growth came from demand for smaller orders and solo dining. In other words, more people are walking through the doors, they're just spending a little less each time.

Earnings Beat, Revenue Miss

The company reported earnings of 91 cents per share, topping the analyst estimate of 90 cents.

Revenue rose 8% year over year to $3.477 billion, reflecting 2% growth excluding foreign currency effects, but missed the $3.504 billion analyst estimate.

System sales increased 3%, excluding currency effects, while same-store transactions grew 3%.

Yum China added 692 net new stores, bringing its total to 19,989 as of Sept. 30.

CEO Joey Wat said Yum China delivered its 10th consecutive quarter of system sales growth, operating profit growth and margin expansion.

Separately, Yum China appointed Alexander Dimitrief to its board, effective Nov. 4.

Margins Fatten Up as Delivery Takes Over

Core operating profit rose 6% year over year, excluding foreign currency effects, while operating margin expanded 50 basis points to 13%.

Operating profit climbed 13% year over year to $451 million, while diluted earnings per share increased 20% to 91 cents.

Restaurant margin also improved 50 basis points to 17.8%, helped by operating efficiencies, lower Pizza Hut license fees and favorable commodity prices.

Delivery sales climbed 7% and accounted for 54% of company sales, compared with 51% a year earlier. More than half of the business now arrives on a scooter.

Active KFC and Pizza Hut members exceeded 278 million, up 6%.

KFC Keeps Building, Pizza Hut Gets a Burger Bar

KFC's system sales and same-store transactions each rose 3% year over year, although average spending per order fell 5%. The chain added 518 net new stores, bringing its total to 14,307.

Yum China expects KCOFFEE Cafe to exceed 5,000 locations and KPRO to surpass 1,500 locations by 2027.

Meanwhile, the company completed its acquisition of the Pizza Hut brand in mainland China on Aug. 7.

Pizza Hut's Burger Bar format expanded to more than 300 locations. Yum China aims to surpass 500 locations by year-end and 1,000 by 2027.

Buybacks Get a $1 Billion Boost

Yum China ended the quarter with $535 million in cash and cash equivalents.

The company returned $362 million to shareholders, including $263 million in buybacks and $99 million in dividends.

It also increased its share repurchase authorization by $1 billion, leaving $1.3 billion available for future buybacks.

Yum China declared a quarterly dividend of 29 cents per share, payable Dec. 22 to shareholders of record Dec. 1.

Starting in 2027, Yum China plans to return approximately 100% of annual free cash flow after dividend payments to non-controlling interests in its subsidiaries.

Store Target Goes Higher

Yum China reaffirmed its 2026-2028 growth framework, targeting mid- to high-single-digit compound annual growth in system sales, high-single-digit growth in operating profit and double-digit earnings-per-share growth.

The company raised its year-end 2026 store target to more than 20,500 locations, representing over 2,400 net new stores.

It also maintained its capital spending outlook of $600 million to $700 million and plans for franchised locations to account for 40% to 50% of new KFC and Pizza Hut openings.

YUMC Price Action: Yum China Holdings shares were down 4.63% at $44.90 during premarket trading on Tuesday, according to market data.