Ladies and gentlemen, thank you for standing by, and welcome to the Yum China 2020 first quarter earnings conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there'll be a question-and-answer session. To ask a question during this session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. Now I'd like to hand the conference over to you for our speaker today, to Ms. Debbie Ding. Thank you. Please go ahead.
Thank you, operator. Hello, everyone, and thank you for joining Yum China's first quarter 2020 earnings conference call. Joining us on today's call are our CEO, Ms. Joey Wat, and our CFO, Mr. Andy Yeung. Before we get started, I'd like to remind you that our earnings call and investor presentation contains forward-looking statements, which are subject to future events and uncertainties. Our actual results may differ materially from these forward-looking statements. All forward-looking statements should be considered in conjunction with the cautionary statement in our earnings release and the risk factors included in our filings with the SEC. This call also includes certain non-GAAP financial measures. You should carefully consider the comparable GAAP measures. Reconciliations of the non-GAAP and GAAP measures is included in our earnings release. Today's call includes three sections. First, Joey will provide an update regarding recent developments in the coronavirus situation.
She will offer some highlights around our first quarter results. Andy will then cover the financial results and provide an update on our full-year outlook. Finally, we'll open the call to questions. You can find the webcast of this call and a PowerPoint presentation which contains operational and financial information for the quarter on our IR website. I'd like to turn the call over to Ms. Joey Wat, CEO of Yum China. Joey?
Thank you. Thank you, Debbie. Thank you all for joining us today. I hope all of you, near and far, remain safe and healthy. Before covering our quarterly performance, I would like to update you on our actions regarding the COVID-19 situation. Throughout this crisis, we made sure that our top priority was the health and safety of our employees and customers. As stores were closed, we worked with local authorities to ensure quick implementation of health measures. We wanted to ensure three things, a commitment to value, a commitment to supply, and a commitment to quality. We wanted to make sure that in a time of crisis, KFC, Pizza Hut, and our other brands would be there to provide reliable, quality meals to our customers, especially those in the front line fighting this outbreak. About 65% of our stores remained open throughout this period.
Even when infection cases were rising and store closures accelerating, our employees and delivery riders continued to show up. They wore masks, observed strict hygiene, and served our customers, providing a vital service in this time of need. Employees are the backbone of our business. We support them and their families by extending holiday pay, even as the stores were closed. We encouraged our employees to look after each other. We strengthened medical insurance coverage for staff and, more importantly, their families. We extended coverage to parents of our restaurant managers up to the age of 75. This is important, as providing for parents is a key cultural duty for us in China. This is simply the right thing to do. Providing this support gave our managers the peace of mind to focus on work and contribute to our long-term success.
Also, in response to the pandemic, myself, Andy, senior executive and board members have agreed to forgo 10% of our salaries for the rest of this year as contributions to fund additional assistance for frontline employees and their families impacted by COVID-19. Since all this started, I have been humbled and impressed by the dedication, resilience, and creativity of our employees. Even as Wuhan was in lockdown and our stores closed, our people helped with the delivery of meals to frontline medical staff. We provided over 170,000 meals at no cost to over 1,450 hospitals and health centers in 28 provinces. On Women's Day on the 8th of March, a day we usually drive holiday sales, we made the decision to close all stores that day in Wuhan that had just opened or reopened.
We instead dedicated these stores to serving thousands of free meals to medical workers that had come from all over China to support Wuhan. With a reputation for quality, safety, and value built over 30 years in China, our brands resonate well with consumers. This trust is a key enabler of success of our pivot to delivery and takeaway programs during this quarter. Importantly, we lived our mission to be the world's most innovative pioneer in the restaurant industry. We pioneered contactless delivery and takeaway. Pizza Hut increased its takeaway offerings and started delivery of ready-to-cook steak. We adapt quickly to changes in consumer needs, relying on our solid execution and market-leading digital capabilities. Recently, the situation appears to have turned a corner. Approximately 99% of our stores are open, with some stores offering delivery and takeaway only or operating with shortened hours. Our Wuhan stores are mostly back in business.
We look forward to again giving our customers what they expected from Yum China: good food, great value, pleasant dining, the convenience and value of our digital experience. Nevertheless, the recovery is not guaranteed, nor linear. Volume has not yet returned to pre-outbreak levels. There remain differences across regions and brands as the country gets back to work. Social distancing, telecommunicating, and reductions in travel may become the new normal. This could fundamentally impact the way we work and the services we provide. 2020 will be a very challenging year. I'm grateful to lead the dedicated team at Yum China. Our culture of innovation, our strong operational excellence, and our leadership in digital and delivery in our industry position us to thrive. This crisis also offers us opportunity to grow, to create, and to build a stronger Yum China. Now, let's move to our first quarter performance.
System sales were down 20%. Approximately 35% of our store base was closed during the peak of the outbreak. Stores that operated suffer outbreak-related declines in sales. We opened 179 new stores, mostly a KFC. Almost all of our new builds were completed in January, with store openings gradually resuming in late March. Same-store sales declined 15%. Sales declines were particularly pronounced at our tourist and transportation locations, with regional and tier differences. We mitigate sales declines with menu innovation, and a shift focus to delivery and takeaway. Our business model proved resilient. With the dedication of our employees across dine-in, delivery, and takeaway, and a strong digital platform, we were quick to adapt. From inventory management to rental relief, we tackled every opportunity. With help from suppliers and landlords, as well as the support from government authorities, we achieved $ 97 million in operating profits in Q1.
We were diligent and flexible in managing inventory issues while maintaining our strict food safety protocols. For example, we used excess premium ice cream inventory from Hokkaido as raw material for our egg tarts and milk tea. This created a high-quality product for customers and prevent unnecessary waste. Delivery and takeaway make an important contribution to operations during the crisis. Delivery was crucial to driving online orders to our stores, while takeaway offered a safe alternative as dine-in services were limited or closed. Delivery sales grew 40%, and delivery sales mix grew to 35% compared to 19% mix last year. In late January, we rolled out contactless delivery on our Super App at both KFC and Pizza Hut. Contactless deliveries emphasize on safety, is both popular and responsible. Over 60% of all owned channel orders at KFC and Pizza Hut selected the contactless option, with adoption peaking at over 80%.
Having dedicated riders was crucial in supporting our business during this time. Our commitments around value, supply, and quality would not have been possible without our amazing riders. This emphasis on safety and rider supply drove our own channel growth above that of aggregators during the quarter. Successful takeaway requires digital pre-order capability, a suitable menu, and packaging, and most importantly, a strong value proposition. KFC and Pizza Hut has all these things. I'm very proud of our Pizza Hut brand, which more than doubled takeaway contribution in a quarter, establishing a clear third option on top of dine-in and delivery as to the resilience of this brand. Turning to digital. Communicating with our customers quickly and transparently was important to building trust and engagement during the outbreak. We leveraged our vast member platform to provide information on our safety protocols and store operations.
Our membership program continued to grow with over 250 million members at the end of the quarter. Member sales exceed 60% at KFC due to the increased shift to online sales. Digital orders account for over 84% of KFC sales and 65% at Pizza Hut. Mobile pre-orders rose as consumers increased use of takeaway services. We continue to drive menu innovation and value even during the crisis. During the quarter, our primary focus was safety and providing tasty food. We emphasized as core product and deferred some new innovations. We continue to delight and surprise with several new products, such as tea-infused hard-boiled eggs, [Non-English content] , which is a traditional Chinese-style item, and very popular, particularly in east and southern part of China. At KFC, also we have [Non-English content] during the Qingming Festival as well, which is a food just for the Qingming Festival.
In Pizza Hut, we launched a crayfish mozzarella pasta, which is [Non-English content ]. We also continue to provide smart, abundant value, which was important in an environment of economic stress. Our signature Crazy Thursday campaign at KFC and RMB 25 one person set meal at Pizza Hut. In Chinese, we call it [Non-English content ]. All these value campaigns were well-received. In late April, we just launched test for our plant-based chicken nugget in some of our Tier 1 stores. We are excited about this new innovation in meat alternatives. Shanghai presale coupons for this test sold out in just one hour. Let me make a few brand-specific observations. First, KFC showed its resilience again. Our digital delivery and takeaway offerings provide a strong basis of support for the business even during the crisis.
Our flexible workforce and variable rent structure across most of our stores allow us to quickly adjust to sales fluctuations. With its focus on casual and family dining, Pizza Hut was more impacted by the outbreak as consumers congregated less and practiced social distancing. We will continue to focus on building a young, family-friendly dining environment while strengthening our offerings for individuals and takeaway. Throughout the crisis, we continued to develop our new and emerging brands. We formed a joint venture with Lavazza and opened the first Lavazza Asia flagship store in Shanghai. As part of this pilot program, this store showcases the premium and authentic Italian coffee experience Lavazza has developed over its 125 years history. We combine this with Yum China's scale, operational capabilities, and in-depth knowledge of the China market.
On April the 8th, we completed the acquisition of Huang Ji Huang, a pioneer of Chinese simmer pot casual dining, menguo. It has over 640 mostly franchised stores, both in China internationally. In addition to this acquisition, we established a Chinese dining business unit comprised of our three core Chinese dining brands, Little Sheep, East Dawning and Huang Ji Huang. I'm confident that the Chinese and Western brands in our portfolio will synergize to delight consumers with delicious food and the digital customer experience. With that, I will hand over the call to our CFO, Andy. Andy?
Thank you, Joey, and good morning, everyone. I will first address key financials and developments in the first quarter, then provide perspective on our full-year outlook. Unless noted otherwise, figures mentioned refer to the first quarter of 2020. All figures are before foreign exchange rate effects, and all comparisons are year-over-year. The first quarter financial result. Total revenues declined 21% due to both temporary store closures and same-store sales declines arising from COVID-19 outbreak. Public health efforts to combat the outbreak resulted in significant store closures and reduced customer traffic. Same-store sales decline was driven by reduced dine-in sales, partly offset by delivery and takeaway growth. Temporary store closures were taken out of the same-store sales calculation and included once they reopened. KFC same-store sales decline of 11% was driven by reduced dine-in traffic. Ticket average benefited from increased mix to delivery and takeaway.
Pizza Hut same-store sales decline was 31%. Reduced dine-in traffic was also primary driver. However, different from KFC, the increase in delivery and takeaway mix contributed to lower ticket average. January sales for both brands were strong leading into Chinese New Year, but was severely impacted later in the month as news of the outbreak became widely reported and social distancing and other restrictions were implemented. As infection rate declined and same store reopened, our sales showed recovery, although we are still below pre-outbreak levels. New store openings were robust in January before the Chinese New Year period. Outbreak-related traffic restrictions and construction worker supply thereafter impacted the pace of our store openings. Restaurant margins were 13.6% at KFC and 0.3% at Pizza Hut. Declines in restaurant margins across both KFC and Pizza Hut were primarily driven by sales leveraging, partly offset by our efforts to control costs.
Specifically, cost of sales was 32%, and a 1.5% year-over-year increase. Commodity inflation for the quarter was 3%. Through decisive actions at the store level and working proactively with our supplier, we were able to manage down inventory write-offs and store-level waste, normally associated with store closure and sales fluctuation. Cost of labor was 25.5%, a 3% year-over-year increase. Year-on-year wage inflation was 4%. Increased portion of delivery sales contributed to higher labor cost percentages. Employees have extra holiday pay and with additional labor hours for increased safety protocols at our stores. We manage our cost of labor by quickly adjusting schedules. Our digital scheduling tools and Pocket Manager, a real-time app, were instrumental in sustaining high level of productivity across both brands. Lastly, temporary relief from social insurance payments provided by the government was approximately $20 million. Rental expenses.
Over the past few years, we have made a concerted effort to increase the variable components and lower the fixed component of our rental expenses to improve the resiliency and flexibility of our operations. In general, approximately 40% of our rental expenses are tied to revenues, which declined proportionately to lower sales in the quarter. In addition, we negotiated approximately $15 million in rental reduction. G&A costs were lower by 11% year-over-year, benefiting from cost control as well as certain one-time government relief programs, including temporary reductions in social insurance payments and accelerated payments of certain government incentives that we received in the first quarter, which would usually have been received in the second or third quarter. We recorded impairment charge of $9 million. Bottom line, we achieved operating profits of $97 million. We are incredibly proud to have achieved profitability in such difficult circumstances.
Effective tax rate was 32.7%, higher than usual, primarily due to the mark-to-market loss from our equity investment in Meituan that is not taxable but reduces our pre-tax income. Net income was $62 million, driven by the operating profit just mentioned, and the $8 million mark-to-market loss from our investment in Meituan. Diluted EPS and adjusted diluted EPS were both $ 0.16 in the first quarter. Next, let me cover our balance sheet and capital allocation. Cash and short-term investment remain strong at $1.54 billion. The COVID-19 outbreak had a significant impact on our operations and results in the first quarter. While the situation in China is gradually stabilizing, we remain cautious as our restaurant traffic is still below pre-outbreak levels. We expect an extended recovery period, and the pace will be uneven across regions, day parts, and segments. We will continue to implement aggressive measures to control our costs.
On the other hand, global inflation continues to rise. It remains difficult to predict the full impact of the pandemic on the broader economy and how consumer behavior may change. The outbreak has highlighted the importance of having a prudent financial process. With a challenging year ahead, we need to proactively maintain a strong balance sheet while positioning ourselves to take advantage of growth opportunities. Therefore, an added one-time relief that are likely to reduce, if not terminated, in early 2Q. We continue to experience significant disruption to our business from the outbreak. Some stores are still closed or operating under limited hours or services. The traffic at restaurants is below pre-outbreak levels as people avoid going out and practice social distancing. The recovery of weekend leisure volume have been weaker than weekdays volume. Traffic at transportation hub and tourist locations has also been extremely soft.
The recovery trend is gradual and choppy. While we will be taking decisive actions with regard to cost management, sales leveraging will continue to pressure margins. At the current sales run rate since the outbreak and excluding one-time relief, we have not reached levels required for sustained profitability. Our store build-out program, previously interrupted, is restarting. We are not revising our target of 800-850 new stores for the year. We will evaluate conditions as the year goes on. We will be revisiting the target as needed. The outbreak highlights the importance of online to offline integration. Our investment in digital, technology, and supply chain will continue. Together with investment in new store and remodeling, our 2020 CapEx plan is unchanged in the range of $500 million-$550 million. We expect wage inflation to stay at mid to high single digits this year. Commodity inflation is still a challenge.
Despite volatility across most commodities, protein supply in China remains tight. Our best estimate of 2020 commodity inflation now is for low to mid single digits. We expect 2020 to be difficult. A new normal characterized by reduced travel and social activity may persist. As we look forward to recovering, we will continue to focus on serving our employees, our customers, and the community in which we operate. At Yum China, we're here for the long run. Before I turn the call to Debbie for the Q&A session, I will update you on some investments we have made. In addition to the acquisition of Huang Ji Huang that Joey mentioned, we have entered into agreement to purchase an additional 25% equity stake in Suzhou KFC for approximately $149 million. We expect to close this transaction in the second half of this year, subject to relevant closing conditions.
Upon closing, Yum China will hold a consolidating 72% equity stake in the entity. With that, I will pass you back to Debbie to start the Q&A. Debbie?
Thanks, Andy. We will now open the call for questions. In order to give as many people as possible the chance to ask questions, please limit your question to one at a time. Operator, please start the Q&A.
Thank you very much. Ladies and gentlemen, we now begin the question-and-answer session. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the pound hash key. Once again, ladies and gentlemen, it is star one and wait for your name to be announced. Thank you very much. We have multiple questions in queue. Our first question is from Xiaopo Wei from Citigroup. Please ask your question.
Hey, good morning, Joey, Andy. First of all, thank you for your hard work and social responsibility during the COVID-19 outbreak. We are seeing very resilient performance, especially KFC. My question is, what's your observation on the consumer behavior changes during the crisis? Andy also mentioned the new norm, and Joey mentioned a lot of innovations. What are you thinking of reinventing yourself in the business, especially for Pizza Hut? We believe that Pizza Hut is focused on casual dining, but it would be more impacted than KFC. Is any inspiration from the crisis which will position yourself better for the recovery of Pizza Hut looking forward? Thank you.
Thank you, Xiaopo. Throughout the crisis, I think in terms of customer response, the first response obviously is about the focus on hygiene and safety, which our business has very long traditional in this area, and we obviously are very well-positioned to enhance that. Then in terms of other behavioral change, basically the value for money and the desire for new food is still there. Most importantly is the availability of food, because right now it's better, but back to February or last week of January, it's very important to provide a service, and our team has worked very hard to keep as many stores open as possible. On top of that, we leverage our digital and delivery and takeaway business model to serve our customers while protecting our employees. The innovation is important as well.
Going forward, is there any sort of behavior change in the medium term, et cetera? The social distancing will linger a little bit. We continue to see that. Particularly, we can see the sales challenge still during the weekend. For weekday, we are okay now. We are pretty much back to last year level. Weekend is still a challenge, and holiday is still a challenge, which is quite different from past sales patterns. On top of that, the traffic hubs, because of the reduced traveling, the traffic hub business are a challenge. The weekend, the dine-in, and the transportation hub. Looking forward, how do we reinvent ourselves, particularly for Pizza Hut? Let me talk about the three themes, and then I'll go to Pizza Hut a bit more. There are three focus: menu innovation, digital innovation, that's one. Second, value for money. Third is cost-saving.
It's not only about the robust business model. Cost-saving is also about we save every bit we can save and pass on the savings back to the customer, to further improve the value for money for the customer. In the long term, while we are in the short term doing the menu innovation, value for money, and cost-saving, in the long term, we are also building an even more agile and robust business model. When it comes to Pizza Hut, as I mentioned earlier in my presentation earlier, I am very proud of Pizza Hut in this crisis. Pizza Hut business has high percentage of dine-in business. Naturally it was more impacted because at the worst time, the dine-in business, even though if we managed to open the store, the dine-in business were not allowed to operate.
KFC, because it's QSR and because high percentage of takeaway sales during the worst time was impacted slightly less. However, it has always been one of the strategic initiatives to build the takeaway business for Pizza Hut. We actually started 2019, Chinese New Year, try to push for the takeaway business. It achieved certain traction, so we get to 5% roughly of the sales is from takeaway. Before the 2020 Chinese New Year, we have planned, and we have prepared, to take advantage of Chinese New Year to accelerate the takeaway business. Then the COVID-19 hit. It actually gave Pizza Hut an opportunity to accelerate the takeaway business even more. For Q1, the takeaway business for Pizza Hut roughly about twice as before, so it's like 10%, 11%. That's for Q1. On average, during the worst time of crisis, the percentage was even higher.
To do a takeaway business, it's not only just tell the customer to do the takeaway business. It requires a few things. One, it requires a digital order capability, the mobile order capability, and we got that ready right before the Chinese New Year. It also require very strong value for money, because that's what customers for takeaway business want. Also require a flexible menu, a slightly different, more simpler menu. During the crisis, because of the sudden closure of the store, we have inventory challenges. Instead of just facing the challenge, we took advantage of this as opportunity to create some new item, with the inventory that we had, and then make it into takeaway menu. The innovation agility happened right there. With that, the takeaway business right now is a meaningful part of the business, which is fantastic.
This is something I believe I shared with our investment community before. We want the delivery business, which is a dominant part of Pizza Hut business already. We also want takeaway business because it does not require the delivery charge, while we are trying to strengthen the dine-in business. I hope that gives you a sense of the challenges of the changes of customer behavior and our focus on building ourselves back and then, a little bit of color on Pizza Hut business. Thank you, Xiaopo.
Great. Thanks.
Our next telephone question is from Brian Bittner from Oppenheimer. Please ask the question, Brian.
Thank you. Thanks for the question. Do you expect any store closings from your competitors because of this crisis? What is your insights regarding the ability for all of the industry capacity in China to survive this pandemic? Secondly, you did not change your guidance for store openings for 2020. Can you just maybe talk a little bit more about how confident you are that you can indeed achieve these store opening goals in 2020? Thank you.
Thank you, Brian. It's a really good question. We believe that we have turned a corner, but I hate to just remind everyone that we're still in the middle of it. It's not over yet. We are still cautious that Q2 and Q3 will still be challenging for our industry in China. I'll get to the competitor bit, but let me give you the context first. For the Q2, we expect May and June will be very challenging for our industry, because sales is recovering but still lower than pre-outbreak level as Andy mentioned earlier. In terms of cost structure, during Q1, I think most of the industry player managed to get some help from the landlord and from the government. Even in some situation, some company can manage to have certain agreement with the employees, in terms of flexible pay.
All these sort of one-time relief that I mentioned, they are likely to go down, if not going away by Q2. That situation is likely to happen during May and June. That's point one. Point two is, what about Q3? Will Q3 be better? Hopefully. However, in our industry, we benefit from the summer, because of children's holiday. Because of children's holiday, that usually give us 20%-30% uplift of sales. This year, the summer holiday for the kids will be shortened. To what extent is still not clear across the board, but it will be shorter. That will be challenging. This is the context, then come to your question, Brian, about the store closing from competitors and et cetera. We have seen some business, mainly the smaller competitors, are going such difficult time. Some very famous name ones.
Right now, this is the test for financial prudence, I suppose. As I mentioned, it still would take some time to see the full impact. Come to your question about store opening. We have not changed our guidance because while things are very tough, we are cautious, but we are also optimistic at the same time, because it is the time for us to continue to build our brand, further refine our business model, and also, it's possible that there will be some locations or store sites that become available. Particularly the high-quality ones. If they become available, our financial prudence will be helpful to allow us to still expand and invest in new store. We are here in China market for long term, and in the long term, we still believe in the market potential. Thus, our unchanged guidance on new store.
Andy, do you have anything to add?
Sure, Joey. Just a few points. As we mentioned, we're investing for the long term. Our fundamental view on China have not changed. We still think there's a lot more opportunity there. Although in the first quarter, we have done roughly 180 new store opening, we're slightly below last year's schedule. As mentioned before, it's mostly impacted by the post-COVID-19's outbreak, obviously traffic situation there in term of worker can returning to work, especially the construction site. We will try to make that up, make up the lost time in the coming quarters. So far we targeted our 2020 new build target. The same go for other CapEx expanding. If you look at how important IT, online operations, supply chain, all these things are during the crisis. I think, in the long term, I think those trend will continue.
We're seeing acceleration in from moving from offline to online, moving more to delivery, takeaways. We need that infrastructure to support our long-term growth opportunities. We will stick to $ 500 million-$550 million in CapEx this year as well. Hopefully that helped answer your question.
Thank you, Andy.
It does. Thank you.
Thank you, Brian.
Our next telephone question is from Michelle Cheng from Goldman Sachs. Please ask your question, Michelle.
Yeah. Hi. Thanks, management. I want to follow up a little bit on the recovery path, since Joey just mentioned that industry will be quite challenging into second quarter, third quarter. Can you please share your thoughts about our recovery path for different brands? When do you think the same store sales to recover to last year level, and how to drive this improvement? I think in announcement you mentioned the uneven recovery across region, day part segment. Can you share more color about this and, potentially also the consumer groups like younger generation, families, et cetera? Thank you.
Thank you, Michelle. Recovery path, as I mentioned earlier, the immediate focus right now is still protecting our staff and also open as many stores as possible and also reopen the dine-in business in some stores that we were still not allowed to open. That's immediate. In terms of focus, immediate is about getting the traffic back. For Q1, for both brands, particularly for KFC, our traffic was very heavily impacted. We make up for the loss of sales with much higher ticket average, by going to corporate catering, et cetera, or big item ticket delivery. Right now, it's still about getting the traffic back. We are happy to see the trend improving during March and then April. April right now, the same-store sales is slightly more than 10%, which is improvement compared to March.
In the medium term, the journey continues, because our traffic is not back to last year yet, as I mentioned earlier, particularly during the weekend and then transportation hub. The question is what to do. When I talk about menu and innovation, I probably should have elaborated a little bit more. For example, for both KFC and Pizza Hut, we adjust our marketing calendar. I'll give you example. Traditionally, we put a lot of these value for money promotion during weekdays, particularly for Pizza Hut, because weekday sales is slightly lower. In Pizza Hut case, the weekday sales is significantly lower than weekend. We put the value program during weekdays. However, now time has changed.
As I mentioned, the problem of a weekend, so even for the same marketing campaign, we'll be shifting the weight of the value program to weekend and holidays to stimulate the sales to get the traffic back. It's sort of a small tweaking, but incredibly important, to get our bullet to focus on the right area. Secondly, in terms of menu and innovation, food, exciting food. In Chinese, we call it [Non-English content] small fortune, small happiness. During the crisis time, we launched [Non-English content], which is a very traditional snack, right? The egg, the tea egg. Customers were surprised and delighted. How do you guys manage to launch new product in the middle of crisis. They were happy. It's wonderful to be in food business, to see that we can put a smile on people's face during such difficult time.
Whether during good time or bad time, good food still make people happy. This month, we test launched a plant-based chicken nugget. Very, very popular. So popular that even our own staff could not have a taste of that because the coupon was gone in one hour. As of right now, this week, Monday, we just launched Douhua, sweet tofu. Well, actually more than sweet. It's spicy and it's salty, different flavor across China. This is like an amazing breakfast item, and a traditional one. It's an item that will bring back so much childhood memory for every Chinese because we have our Douhua when we were kids, but it's pretty much very hard to find right now because it's street food. We put the item on our menu, and the response, it's fantastic. Really look forward to that. Good food.
The value for money, good price, because now or in the medium term or even longer term, there's such uncertainty of future. Even for people who might be a bit relaxed with the money in the pocket right now might think twice. During such difficult time, the value for money becomes even more important. We did not raise price. Douhua is still priced at $ 7, slightly more than $1. Well, actually exactly at $1. The value for money will continue that and we can only make it possible if we look at our entire cost structure and look at all the possible area of improvement so that we are committed to pass on the saving back to the customer. It's a commitment from our entire company, not only the customer, but frontline employees.
During the very difficult time, we expand the medical coverage, and we protect all our frontline staff pay, even when the stores are closed. We understand the importance of our employee and our customer during bad time and good time. There's no magic, nor there's some fancy strategy there. It is about our commitment in the short term and long term, to deliver customers something that they like so that they can enjoy affordable and delicious food, either in our store or at their home, or at whatever convenient through takeaway. Michelle , thank you very much.
I just have a couple of things to add. As you mentioned on our press release, our current, at least in this month so far, our traffic is still down compared to the pre-COVID level. I think more than 10% same-store sales compared to last year. We also constrained as Joey mentioned. We have a sizable portion of our business is in the transportation hub and tourist location. As you probably know, most airports still have very limited services. Same go for the high-speed train services. We do see that portion of business quite depressed. If you look at our recovery trajectory, for example, like in January, we go into the January before Chinese New Year very strong. We were significantly impacted by the outbreak.
The trough was in February, then we're beginning to recover as the outbreak eased and people beginning to return to work. We benefited quite a bit because we have kept most of our stores open during that period of time. We're one of the few options and safe and healthy options for folks to get food. As we mentioned, like in the previous update, 20% year-over-year, same-store sales declined in March, then now we are about 10%. We're still constrained. Tourists locations, transportation hub are still restricted quite a bit in terms of traffic. Then we look forward to the recovery. I think, the timing of those locations, how they will recover, I think is still a little bit uncertain at this moment. Also, as Joey mentioned, there's some social behavior change that are still lingering from the outbreak.
Social distancing still being practiced here in China. People on the weekend, even when they go to a restaurant, they try to avoid congregation in large crowd. I think, how long that will last and how long it will take for us to go to the normal prior to the outbreak, I think is still quite a bit uncertainty and it's hard to predict at this time, especially given the situations globally. How that reverberate back into the Chinese economy, and how that will change consumer behavior. I think we still have yet to see clearly at this time.
Thank you, Andy. Michelle, I do notice that at the end of your question, you asked about the regional and tier. There is difference. East region has recovered the best. Then some region in northern part of China is still slightly behind. In terms of city tier, our lower-tier cities are doing slightly better than the top-tier city. For a few reasons. The main reason is tier 1 city like Beijing, particularly Beijing, Shanghai, Guangzhou, Shenzhen, particularly Beijing, these tier 1 cities have disproportionately higher percentage of sales from transportation hubs. Since the transportation hub business are still heavily impacted, we are talking about half of the business being impacted in transportation hub and thus impact the overall top-tier city business recovery. For lower-tier cities business, it has been quite resilient for other reasons as well, other than the lack of transportation hub.
In lower tier cities, during the most difficult time, it was not uncommon, actually it was reported by some media outside China, if you went to a small city at that time, it was very likely that KFC was the only store that was operating. Even right now as the country is recovering from the crisis, the competition in the lower tier cities still favor us because of our strong reputation in hygiene and food safety. That's the difference. Thank you, Michelle.
Our next question is from Anne Ling from Jefferies. Please ask the question, Anne.
Hey. Hi, management team. Thank you for taking the question. I have two questions. First, it's on the cost side. Management mentions about all these cost increase. Just want to check whether this include all these one-time relief in first quarter and possibly in the second quarter? If you could share with us what is the nature? You just talk about some of these pension relief and all that. Would you share with us, would you itemize what are these nature and, on this part, and whether it's included in our cost assumption and all that? Also, in terms of the commodity price increase, it seems that based on some of the latest trends, the chicken price actually starts to come down these days.
Is it fair to say that we should be seeing some delay impact from last year's higher inventory cost that first half we might see a higher commodity price increase and then subsequently, it will be lower? How do we see this cost trend by half year basis? Lastly, in terms of the upcoming Labor Holidays, do we have any expectation? Is it fair to say that this will be a good test in terms of to test out how quickly the consumer can come back? Thank you.
Okay. Thank you, Anne. This is Andy. I will try to address your question regarding the cost increases, the one-time relief in the first quarter, and then how does that look like in the second quarter. As we mentioned in the prepared remark, we did receive some relief from the government in term of social insurance payment. There was a general reduction of that across China. We benefit from that as well. That's approximately $20 million of that in the cost of labor. Another probably a few million dollars in our SG&A. We also received rent reduction, right? From the landlord in the quarter, it's about $15 million. Those in total is roughly about $40 million in one time. If you look at the social insurance payment reduction program, I think that's going to expire early second quarter.
I think in April is the last month that we would probably receive that relief. Same for rent, most of our landlord have agreed to rent reductions during the crisis. As the economy, as our industry beginning to recover, we do not expect, if there's any rent reduction, to be the same magnitude as we have received in the first quarter. We also have about $50 million worth of government incentive that we received in the first quarter that we normally receive in the second or third quarter. If you do that, you will notice that we will benefit in the first quarter, but on our year-over-year comparisons will be more difficult for us going into the second and the third quarter. I think you also have mentioned the commodity price, chicken in particular.
I think as we mentioned, we do expect cost of sales at a single digit level. You're right, I think the demand declines and logistic issues we suffered from the COVID-19 have caused a temporary glut of supply in poultry during that period of time. The price did come down a little bit. If you look at, however, the overall commodity prices is still at a very high elevated level. If you look at, for example, pork price is more than double year-over-year. Still very high level. The reason is because overall protein products remain very tight in China despite the crisis. If you think about the feedstock that are going into raising chicken and pigs and all that, it still remain very tight because transportation and international transportation are being impacted by COVID. It may have an impact later on as well.
As we have mentioned before, our contract generally set at least a quarter ahead of time. I think we'll see how this is going to pan out. I think overall, our expectation is that protein prices in China, chicken, pork, et cetera, will remain elevated in the near term and intermediate term. If we also looking at the impact of holiday shift, first of all, I think that coming up is next week, we have the May 1st Labor Day or long weekend. I think if you look at it's a tricky one, right? Obviously, on one point, we have been cooped up in our houses for a long time, and then we want to go out and sightsee and do all kind of tourist attractions.
On the other hand, the government is also aware of the large congregation of people, at this point, probably not a preferred option. We do see some cities in China have implemented different schedule for kids for the holiday period, so that they try to alleviate that congestions during holiday outing. I think it will be interesting to see how consumer behavior actually going to work out for the long weekend coming up. Overall, I think, we also are looking into other holiday and kind of shift that would have impact on our business. If you think about school year this year have shift quite a bit. I think a number of city also announced that they're going to shorten or delay the summer vacation holiday. That is going to have an impact on our business.
Obviously, historically, summer, when kids are out, people traveling, that generally is a peak season for us. The shift in school holiday may have impact for the summer for us.
Yeah. Just for the May 1st holiday, on top of what Andy just mentioned, the transportation hub business will still be struggling. The reason is that schools are opening up, particularly for the younger kids, after the May holiday. That means that parents and kids are not encouraged to travel outside their city before the school started. Our transportation hub business in the train station are likely to continue to suffer a little bit, even during the May holiday. Thank you.
Thank you.
Got it. Thank you.
Our next question is from Sara Senatore from Bernstein. Please ask your question, Sara.
Hi. Thank you. I wanted to step away from the current environment and just ask about the portfolio you're building, Lavazza now and then COFFii & JOY, the recent acquisition of Huang Ji Huang, sorry if I butchered that, increased equity stake, and I think an investee. Just, how should we think about these acquisitions in terms of contribution to growth over time? I think historically, some of your smaller concepts have not performed as well as KFC or even Pizza Hut, and maybe just the trade-off between making these investments now and suspending your share buyback, as we think about how you're allocating capital. Thank you.
Thank you, Sara. I will try to address your questions. In term of our overall brand portfolio, for example, you can think of it as sort of three main grouping for us, right? We have the Western food, which consists of KFC, Pizza Hut, and Taco Bell. Our announcement of the equity investment in Suzhou KFC is to strengthen our control. The Suzhou KFC was a joint venture. We are able to negotiate a favorable term for us for this transaction. We take that opportunity to gain control of the JV. I think over time it would be incremental to our operation. Okay? I think going forward, I think we'll also look into other potential opportunity, obviously, to continue to grow our restaurant food portfolio in this three-core brand.
If we look at the Huang Ji Huang acquisitions, that is sort of complementary to our existing Little Sheep operation. It forms our Chinese cuisine. As we have mentioned, it's important to gain a larger share of stomach from Chinese consumer. Chinese food remains the largest portion of the restaurant business. We would like to gain some expertise in that area. It's a very large and growing market. If you think about the investment for Huang Ji Huang, which is slightly less than $200 million, I think that is a good investment in term of leveraging our existing infrastructure to scale that franchise business. I think in long run will help us to build expertise in Chinese cuisine product and services. It's an important long-term growth driver for us. Okay? In term of coffee, I think coffee is mostly an organic initiative.
K Coffee is sort of a sub-brand within KFC and we roll out that across our restaurant, have been very successful. Right. We have, I think so far, like 137 million cup of coffees. Making us one of the largest coffee seller in China. COFFii & JOY is a concept that we launched a little bit more than one year ago, or two, almost two years now. It's still in a developmental phase. While it's not possible, and you should not expect building a new brand to be possible in the first year or two. We are very disciplined. If you have look at our store number, and new build number, we have been extremely disciplined, and our concept is always to try and experiment with the product offering, with the format of the store.
Once we have a winning formula, we would scale it up quickly. Given our capability in building the store and building our infrastructure, I think that would be really good. The first thing is finding the right product, the right mix of a model for [Xingje]. Lavazza. Lavazza is a joint venture we have set up. It's a wonderful brand, a wonderful coffee brand globally. Right now, we have one flagship store for this joint venture, and it has been pretty well received since our soft launch, right? We will continue to develop that pipeline. In terms of our capital allocations strategy, number one priority for us, as we always mention, is organic growth. We'll continue to invest in store opening. We're modeling up our store.
The second part is that you continue to invest in some of this growth initiative, like coffee, like Chinese cuisine. If look at the third one is obviously, we're very committed to return excessive cash to our shareholder. Over the past couple years, we also obviously have a share repurchase program that was $1.5 billion. We purchased almost $ 800 million-plus of our share. We still have about $ 600-and-some million in the program. I think once the situation stabilize and become clear, we'll continue that commitment to return excessive cash to shareholder. We'll only do so when it's appropriate and prudent. During this time of crisis or during time of uncertainty, I think we have proven that a strong balance sheet is extremely important, especially for a restaurant operator.
That's number one priority for us, to make sure that we have the balance sheet to maintain normal operations, to deal with any contingency that may have arise, and then continue to invest for our long-term growth opportunities. Right. That's our priority. I hope I addressed your question, Sara.
Yes. Thank you.
Our next question is from Christine Peng from UBS. Please ask the question, Christine.
Thank you. I think most of the questions I have already been addressed by the management. If I could ask the last question I have towards Joey. Given all the changes you are seeing in the restaurant industry during the COVID-19, especially given your resilience during this crisis, should we expecting even higher than 2019 expansion pace as you look into 2021 in terms of the store opening, et cetera? Thank you.
Thank you, Christine. You are familiar with our business. We always emphasize that we sort of have a rough guidance of the number of new stores. We don't really give it as a sort of a target to the business. We make the store opening decision from bottom-up perspective. If we can find enough store that meets our financial assessment and the growth assessment, we'll open the store. Financially, we're prudent enough, we have the capital. If the store itself does not pass the test, we won't. Therefore, it's very difficult to sort of have a very, very specific target. If we see the opportunity, of course, we'll take it. We never really push our team to chase after the target.
It's always good to have a bit more certainty, however, we have been doing it because we emphasize on the quality of the store more than the quantity of the store. For us, the quality of the store is not something that we compromise. I guess the short answer is, it's possible if we find the opportunity, but if we do not find opportunity, we won't force ourselves or push our team to do it.
Right. Now, this is Andy. I want to emphasize that even though we provide a store opening target each year, that is just sort of like a guideline aim that help our team to aim for. We have a very internal, very disciplined process to make sure that the store that we opened are financially viable projects. It's very good that our team, our development team, have done a very good job over the past two years opening stores. As you can see from our financial performance, those stores have very good payback. If you look at KFC, it's roughly a little bit more than two years. Then if you look at Pizza Hut, it's about three to four years. Very good by industry standard, and we will try to maintain that.
Speaking with you on the next earnings call. That concludes today's call. Thank you and have a good day. Thank you very much.
Thank you, everyone.
Thank you.
Ladies and gentlemen, you may all disconnect and goodbye.