Operator: Your next question comes from Chen Luo with Bank of America. Please go ahead.
Chen Luo: Thank you, Joey and Andy. Sorry, actually my line got distracted — disconnected just now, although actually dialed in to call at 6:30 am in the morning. So forgive me if I ask some questions about how what were they being asked previously. So basically, it’s actually on margins. So I noticed that our restaurant margins for 2023 actually has already recovered to a level even slightly higher than 2019, so making it the third highest margin since our spin off. But compared with 5 years ago, our margin structure has significantly changed. So our labor costs as potential revenue has risen significantly, but our occupancy and others have reduced significantly. So going forward, do you think that there’s room for us to maintain a largely stable labor to sales ratio, especially given that recently our channel checks such as we have taken a lot of measures to control the rider costs, such as the introduction of [indiscernible] as our future vendors as well as our continual rollout of the RGM, macro program.
So do you think there’s room for us to see a large stable labor cost as opposed to the rising labor costs trend in the past few years. And meanwhile I noticed that our food and paper cost as [indiscernible] revenue has risen by 50 bps, 80 bps for KFC and 50 bps for the whole group, giving them very promotional environment? Do we think it’s going to be a new normal for the entire year of ’24. And lastly, just now, I heard about guidance for largely flattish OP for the full year, excluding FX and one-off items. But then if you look at reported level, I remember, last year, we booked a one-off gain of 27 million in now OP that may actually lead to a missing or digit impact. And then, given the FX is another 5% impact. So is it fair to say that on the reporting level, actually, the OP may possibly decline by around 10%-ish?
Of course, I think this is — this should be the worst case. But hopefully, if everything is going in the right direction, the actual decline could be better than that. So these are all my questions. Thank you.
Joey Wat: Thank you, Chen Luo. Let me actually answer one question that the Kevin and another and Brian early and now come to your question is about the same-store sales growth. Let me just point out that 60% of our store in our portfolio right now portfolio right now are built after 2019. So there’s a reason why we really, will continue to drive the same-store sales, but the system sales growth is incredibly important for business. And then come to the cost side, O&O. The labor costs — let’s talk about O&O, first. We have been operating with the guiding principle that we always are sincere about getting the best food to a customer has all the saving, past a lot of savings to our customer. So if you look at our cost of sales over the last few years, it has been very stable.
Very, very stable, through better time, or more challenging time. So if I start with 2019, pre-pandemic, or even, well, 2019 pre-pandemic throughout the time. 2019, 31.3%, 2020 31.7%, 2021 31.4%, 2022 31.1%, 2023 31%. It’s really less than 1% swing around the 31%. It’s always there because whenever we have saving, we pass the savings to the customer through food, or you can be assured that we’ll continue to stay around 31%, about the cost of sales, because if my team goes in this country below that number, they will have a very hard time for myself. And they all know that. Second is cost of labor. Cost of labor even in a year, like this year, yes, it has increased because there are a lot of sort of the insurance and et cetera, et cetera. All these costs are going up.
And labor costs is always sort of going up. I spent 10 years in U.K even when the GDP was going south during the 5- year out of 10 years. I will say, labor cost was still going up. So we have to every year find ways to help our staff to become more productive, which we have been doing it and going forward, you can see we even go as far as one store managing multiple. So it has gone up few points [ph]. 2019, its 22.8% and then go up to ’23, ’25 and ’26 now its staying at 26% over the last 2 years. And the way that we run this business, we generate savings from O&O. From rent from depreciation, from everything that we could save, and then process saving to our staff, we pay them at fair pay, and we’ve hopefully paid them well we give them really good health insurance, et cetera, even though because we want to have the best staff to provide the best service for our customer.
So that will be the direction, we will continue to drive. In terms of OP, as a result foreign exchange et cetera. I’m sorry, cannot forecast that is beyond a company’s to the validity. So we will do everything we could to generate sales and to manage costs and then produce the result as a result of good effort. Thank you, Chen Luo.
Chen Luo: Thank you.
Operator: Thank you. That is all the time we have for questions today. I’ll now hand back to Ms. Shen for closing remarks.
Michelle Shen: Thank you, Ashley, and thank you everyone for joining the call today. For further questions, please reach out through the contact information in our earnings release and our website. Have a great day.
A – Andy Yeung: Thank you. Bye, bye.
A – Joey Wat: Thank you.
Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
