Yum! Brands Reports Drop in Profits

GLOBAL - Food service and fast food chain Yum! Brands has reported a fall in worldwide operating profit of 10 per cent, including a decline of 26 per cent in China.
calendar icon 5 February 2014
clock icon 4 minute read

Operating profit grew by 10 per cent at Yum! Restaurants International and three per cent in the US.

Earnings per share grew by four per cent, or $0.86, excluding special Items for the fourth quarter of the year to the end of December. Reported EPS was $0.70 for the quarter and $2.36 for the year.

The company said that KFC China sales and profits were significantly impacted by the effects of the December 2012 poultry supply incident, as well as subsequent news of avian flu.

Worldwide system sales grew by two per cent including a five per cent growth at YRI and a one per cent growth in the US.

System sales fell by four per cent in China.

Same-store sales declined by 13 per cent in China. Same-store sales grew by one per cent at YRI and were flat in the US.

Total international development was 1,952 new restaurants with 82 per cent of this development in emerging markets.

Worldwide restaurant margin declined by 1.6 percentage points to 15 per cent including a decline of 2.7 percentage points in China.

Restaurant margin was even at YRI and increased 0.6 percentage points in the U.S.

In the fourth quarter worldwide system sales grew by three per cent, prior to foreign currency translation, including three per cent growth in China and six per cent growth at YRI. System sales declined by one per cent in the US.

Same-store sales for the quarter declined by four per cent in China and two per cent in the US. Same-store sales grew by two per cent at YRI.

Worldwide operating profit grew by two per cent, including a five per cent growth in China, 11 per cent at YRI and two per cent in the US.

David C. Novak, Chairman and CEO said, “While 2013 was a challenging year, I’m pleased to report continued progress as we enter 2014 with fourth-quarter EPS growth of 4%, excluding Special Items. More importantly, with the decisive actions we've taken to strengthen our company across the board, we are well positioned to deliver double-digit EPS growth in 2014 and the years ahead.

“In China, we strengthened our poultry supply chain, made significant progress rebuilding consumer trust in the KFC brand and made substantial gains in restaurant productivity. At Pizza Hut Casual Dining, we increased our asset base by 28%, grew same-store sales by 4% and expanded breakfast into over 120 restaurants. We also achieved solid unit economics at Pizza Hut Home Service, and intend to scale this business over time. Overall, we opened 740 new restaurants in China, further strengthening our category-leading positions.

“Outside of China, our franchise-led system opened over 1,200 new international restaurants, including more than 70% in high-growth emerging markets. Additionally, we continued to make investments ahead of the growth curve in India as we opened over 150 new units.

“In the US, Taco Bell delivered its eighth consecutive quarter of same-store sales growth and we are enthusiastic about our upcoming national breakfast launch. We are also excited about our plans at Pizza Hut to nationally advertise WingStreet and its award-winning chicken wings for the first time.

“Importantly, as of 1 January 2014, we combined our Yum! Restaurants International and U.S. divisions into three global brand divisions: KFC, Pizza Hut and Taco Bell.

“China and India will remain separate divisions given their strategic importance and enormous growth potential. This new structure is designed to drive greater brand focus and lead to even more aggressive global growth.

“We are confident we have the people and resources to deliver at least 20% EPS growth in 2014 and re-establish our track record of double-digit EPS growth.”

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