By Anna Prior
Yum Brands Inc.'s first-quarter profit rose 18%, as the parent
company of KFC, Taco Bell and Pizza Hut recorded improved sales in
China.
Yum's earnings topped Wall Street's expectations.
The restaurant company has been trying to recover from
food-safety concerns in China, the company's biggest market,
related to KFC chicken suppliers more than a year ago. Late last
year, Yum began an advertising and social-media campaign to assure
people that its food is safe, and promised new initiatives to
improve its KFC brand in China during this year.
Yum in March launched a new menu and marketing campaign in
China, rolling out two new chicken sandwiches and three rice dishes
as well as drinks and desserts for its China-based KFC outlets. The
company also said at that time it will tap Chinese celebrities to
promote its new products.
On Tuesday, Yum said same-store sales in China grew 9% for the
first quarter, including 11% growth at KFC and 8% growth at Pizza
Hut Casual Dining.
Outside of China, the company reported solid sales and profit
performance in Africa and Russia, as well as developed markets such
as KFC in the U.K. and Australia, but experienced disappointing
U.S. results, said Chief Executive David Novak, blaming the
negative impact of severe weather.
Yum said U.S. same-store sales for all three brands declined
during the most recent period, with a 3% drop at KFC, 5% drop at
Pizza Hut and 1% drop at Taco Bell.
Taco Bell, which launched a breakfast menu last month with items
such as the waffle taco, makes up the bulk of the company's U.S.
operating profit, said Senior Vice President of Public Affairs
Jonathan Blum, noting that breakfast is "off to a great start" at
Taco Bell and will be more apparent in the company's second-quarter
results.
For the first quarter, Yum reported a profit of $399 million, or
87 cents a share, up from $337 million, or 72 cents a share, a year
earlier. Excluding special items, adjusted per-share earnings for
the year earlier period were 70 cents.
Revenue rose 7.5% to $2.72 billion.
Analysts polled by Thomson Reuters were expecting earnings of 85
cents a share on revenue of $2.8 billion.
Yum's world-wide restaurant margin increased 3.3 percentage
points to 19.2%.
By brand, excluding China and India, total KFC division
same-store sales grew 1%, while Pizza Hut division same-store sales
declined 2% and Taco Bell division same-store sales fell 1%.
Shares rose 3.9% to $80.50 in after hours trading. Through
Tuesday's close, the stock has risen 19% in the last 12 months.
Write to Anna Prior at anna.prior@wsj.com
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