Yum Brands Swings to Profit but Sales Decline--Update
February 03 2016 - 6:03PM
Dow Jones News
By Maria Armental
Yum Brands Inc. on Wednesday swung to a fourth-quarter profit
although sales declined, missing Wall Street projections.
Its bruised China business, which Yum plans to spin off by
year's end, showed continued signs of recovery, posting a 7% system
sales increase, which adjusts for currency fluctuation and includes
franchise sales, and 1.9% top-line growth overall. It saw a 2%
increase at restaurants open for at least a year, the second
consecutive quarterly increase of the key metric.
Shares of the company, down 1.6% over the past 12 months, fell
1.3% to $71.52 in late trading.
Restaurant margin, meanwhile, improved 4.3 percentage points to
11.4%.
The Louisville, Ky., company was the first major Western
fast-food company in China, opening a KFC near Beijing's Tiananmen
Square in 1987 and building the brand into the largest
foreign-restaurant chain in that country.
But the China division, which accounts for the bulk of its sales
and once at the center of the company's expansion plans, had
dragged results amid food quality concerns.
As part of the planned spinoff, Yum has pledged to return $6.2
billion to shareholders before the separation is complete.
Over all, for the period ended Oct. 26, Yum reported a profit of
$275 million, or 63 cents a share, compared with a year-earlier
loss of $86 million, or 20 cents a share. The year-ago results were
hammered by a $361 million charge from adjusting the value of
Little Sheep, at the time billed as one of the first successful
takeovers of a major Chinese brand.
Excluding special items, profit rose to 68 cents a share from 61
cents a year earlier. Revenue, which includes franchise and license
fees, declined 1.2% to $3.95 billion.
Analysts surveyed by Thomson Reuters had projected 66 cents a
share on $4.02 billion in revenue.
Restaurant chains have largely franchised locations as a way to
avoid volatility of high-cost items, such as labor and commodities.
Yum plans to franchise 96% of its restaurants by 2017. At the end
of the year, about 79% of its restaurants were run by a
franchisee.
System sales at KFC sales rose 6% in the latest quarter, with
Taco Bell up 7% and Pizza Hut up 2%. Company revenue declined 8.6%
at KFC division, hit by currency effects, while Taco Bell revenue
rose 3.1% and Pizza Hut revenue fell 1.1%.
World-wide restaurant profit margin improved 3.4 percentage
points to 13.6%.
Yum backed its guidance of increasing 10% operating profit in
2016, stripping the effects of currency conversion.
Write to Maria Armental at maria.armental@wsj.com
(END) Dow Jones Newswires
February 03, 2016 17:48 ET (22:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
Yum Brands (NYSE:YUM)
Historical Stock Chart
From Aug 2024 to Sep 2024
Yum Brands (NYSE:YUM)
Historical Stock Chart
From Sep 2023 to Sep 2024