Yum Brands Profit Climbs, Helped by China Strength
April 20 2016 - 5:40PM
Dow Jones News
Yum Brands Inc.'s profit rose in the March quarter as its China
business continued to show signs of recovery, posting its third
consecutive quarterly increase in a key sales metric.
Citing the results, the Louisville, Ky., company raised its
projections for growth in core operating profit to 12%, adjusted
for currency conversions, from its previous target of a 10%
improvement.
Shares, up 2% over the past 12 months, rose 4% to $85.80 in
after-hours trading.
The China business, which accounts for about half of the
company's revenue and that Yum plans to spin off by year's end,
reported an 11% system sales increase, adjusted for currency
conversions, and a 6% increase at restaurants open for at least a
year, the third consecutive quarterly increase. Restaurant margin,
meanwhile, improved 3.5 percentage points to 22.4%.
In addition to planning to spin off the once fast-growing
business, which had weakened by food-safety scares and stiffer
competition, Yum is considering selling a stake in the business,
The Wall Street Journal reported last month, citing people familiar
with the situation.
As part of the planned spinoff, Yum has pledged to return $6.2
billion to shareholders before the separation is complete.
Yum 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 the
country.
Over all, for the period ended March 19, Yum reported a profit
of $391 million, or 93 cents a share, compared with $362 million,
or 81 cents a share. Excluding certain items, including costs tied
to the planned separation of the China business, profit rose to 95
cents a share from 80 cents a year earlier.
Revenue, which includes franchise and license fees, eased 0.1%
to $2.62 billion.
Analysts surveyed by Thomson Reuters had projected 83 cents a
share on $2.65 billion in revenue.
System sales at KFC rose 5% in the latest quarter, also adjusted
for currency conversions, while Taco Bell reported a 3% increase
and Pizza Hut a 4% increase.
Company sales declined 7% at KFC division, 3% at Taco Bell at 8%
at Pizza Hut.
Write to Maria Armental at maria.armental@wsj.com
(END) Dow Jones Newswires
April 20, 2016 17:25 ET (21:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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