Yum Raises Guidance Ahead of China Spinoff -- WSJ
October 06 2016 - 3:03AM
Dow Jones News
By Maria Armental
Yum Brands Inc. on Wednesday raised further a key annual profit
projection ahead of the planned spinoff of its China business even
as sales fell again in the September quarter.
Louisville, Ky.-based Yum now projects core operating profit,
adjusted for currency conversions, to increase at least 15% from a
year earlier, compared with its earlier view of at least 14%. Those
projections, however, will be adjusted to account for the China
division spinoff, company officials said.
Yum has reported lower sales on a year-over-year basis in all
but one quarter in the past two years.
Shares, up 21% this year, fell 2.3% to $86.61 in after-hours
trading.
Yum China is to begin trading Nov. 1 on the New York Stock
Exchange under the ticker symbol YUMC. The company will be led by
longtime Yum veteran Muktesh "Micky" Pant and has secured
investments from a prominent Chinese deal maker and the financial
affiliate of Chinese e-commerce giant Alibaba Holding Ltd.
Company officials will update shareholders on the spinoff next
Tuesday. A conference call to discuss the most recent financial
results is scheduled Thursday morning.
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 Sept. 3, Yum reported profit
surged 48% to $622 million, or $1.56 a share. Excluding special
items, profit rose to $1.09 a share from $1 a year earlier.
Meanwhile, revenue, which includes franchise and license fees,
fell 3% to $3.32 billion.
Analysts surveyed by Thomson Reuters had projected $1.10 a share
on $3.47 billion in revenue.
In the recently completed period and adjusted for currency
conversions, system sales at KFC rose 7%, while Taco Bell reported
a 5% increase and Pizza Hut broke even. The China business, which
accounts for more than half of Yum's revenue, reported an 3% system
sales increase, as business continues to pick up, helped in part by
tax changes in China this year. However, Pizza Hut remains a
concern as sales at locations open for at least a year contracted
4% in the third quarter.
In a statement, Chief Executive Greg Creed blamed the decline in
the China division's comparable sales to negative sentiment in the
region following an international court ruling over the South China
Sea.
"The good news is the incident was short-lived, and the sales
impact continued to dissipate through August and September," Mr.
Creed wrote, adding results at Pizza Hut continued to improve from
the previous quarter.
Yum reported overall sales at locations open for at least a year
rose 1% from the year-ago period, driven by KFC and Taco Bell and
offsetting declines at Pizza Hut and the China division. Analysts
surveyed by FactSet had projected a 2.4% increase.
Write to Maria Armental at maria.armental@wsj.com
(END) Dow Jones Newswires
October 06, 2016 02:48 ET (06:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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