Strong Performance in China, India Boost Yum Brands' Results

GLOBAL - In its latest quarterly results, Yum! Brands - which includes KFC, Pizza Hut and Taco Bell - reported a strong recovery in its business in China following previous food safety concerns, with sales up 21 per cent and operating profit 188 per cent higher. Sales by its India Division increased 18 per cent and operating loss was greatly reduced.
calendar icon 21 July 2014
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Yum! Brands, Inc. has reported results for the second quarter ended 14 June 2014, including earnings per share (EPS) of $0.73.

Its worldwide system sales grew six per cent; worldwide restaurant margin increased 3.0 percentage points to 15.5 per cent, and worldwide operating profit increased 34 per cent.

Total international development was 298 new restaurants; 78 per cent of this development occurred in emerging markets.

China Division system sales increased 21 per cent, driven by seven per cent unit growth and 15 per cent same-store sales growth. Restaurant margin increased 6.2 percentage points to 16.8 per cent. Operating profit increased 188 per cent.

KFC Division system sales increased by five per cent, driven by one per cent unit growth and two per cent same-store sales growth. Restaurant margin increased 0.3 percentage points to 12.9 per cent. Operating profit increased 12 per cent.

Pizza Hut Division system sales declined one per cent, as two per cent unit growth was offset by a three per cent same-store sales decline. Restaurant margin decreased 6.4 percentage points to 7.2 per cent. Operating profit decreased 22 per cent.

Taco Bell Division system sales increased three per cent, driven by one per cent unit growth and two per cent same-store sales growth. Restaurant margin decreased 2.7 percentage points to 17.7 per cent. Operating profit decreased two per cent.

India Division system sales increased 18 per cent, driven by 25 per cent unit growth which was partially offset by a two per cent same-store sales decline.

Worldwide effective tax rate increased to 24.9 per cent from 22.1 per cent.

Foreign currency translation negatively impacted operating profit by $7 million.

CEO comments

David C. Novak, Chairman and CEO said: “Yum! Brands is well on its way to delivering full-year EPS growth of at least 20 per cent, with second-quarter EPS growth of 30 per cent. Operating profit grew 188 per cent in China driven by strong sales and margin performance. Just as important, I’m confident we are building momentum behind major initiatives around the world that will sustain double-digit EPS growth in 2015 and beyond.

“China Division system sales increased 21 per cent as we opened 104 new restaurants and delivered same-store sales growth of 15 per cent. Restaurant margins were 16.8 per cent, which was 6.2 percentage points above prior year. We are especially pleased with the initial success of our KFC Menu Revamp and excited about our plans balance of year. Overall, we remain on track to open at least 700 new restaurants in China as we further capitalize on the world’s largest and fastest growing consuming class.

“Outside of China, we expect to open a record 1,250 new international units this year, further strengthening our leadership position in emerging markets. We also delivered solid sales and profit growth at our KFC division, led by strong international performance. At Taco Bell, we’re very pleased with the initial results of our national breakfast launch and have a strong new product pipeline across all day-parts to drive a strong second half. At Pizza Hut, although second-quarter results were disappointing, we are taking significant actions in our US business to reignite sales and expect to make substantial progress balance of year.

“Overall, we have a compelling business model and will continue to invest behind the significant growth opportunities we see around the world. We remain focused on the three keys to driving shareholder value: new-unit development, same-store sales growth and generating high returns on invested capital.”

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