Yum! Brands Details Transformation Plans to Drive Growth of KFC, Pizza Hut & Taco Bell after China Separation at Annual Inves...
October 11 2016 - 07:30AM
Business Wire
Yum! Brands, Inc. (NYSE: YUM) will announce today at its annual
investor conference in New York City the Company’s strategic
transformation plans to drive growth of its KFC, Pizza Hut and Taco
Bell brands following the separation of its China business,
currently expected to be completed after the close of business on
October 31, 2016. Yum! Brands will outline how the Company is
sharpening its focus on the development of its three iconic global
brands, increasing its franchise ownership and creating a leaner,
more efficient cost structure. The Company will also provide an
update for returning capital to shareholders.
“Our mission is to build the world’s most loved, trusted and
fastest-growing restaurant brands,” said Greg Creed, Chief
Executive Officer of Yum! Brands. “The transformation we are
announcing today is a significant investment in our future designed
to build and strengthen KFC, Pizza Hut and Taco Bell around the
world and to create even more long-term value for our shareholders.
As a ‘pure play’ franchisor, the transformed Yum! Brands will
become more efficient and capital light with an optimized capital
structure, improved cash flow and laser-like focus on our key
strategies to drive same-store sales and new unit growth
worldwide.”
Major features of the Company’s transformation and growth
strategy involve being more focused, franchised and efficient.
- More Focused. Four growth
drivers will form the basis of Yum! Brands’ strategic plans and
repeatable business model to accelerate same-store sales growth and
net-new restaurant development at KFC, Pizza Hut and Taco Bell
around the world over the long term. The Company will focus on
becoming best-in-class in:
- Building Distinctive, Relevant
Brands, by increasing investment in consumer insights, core
product innovation, digital excellence and initiatives that
strengthen the quality, convenience and appeal of the customer
experience;
- Developing Unmatched Franchise
Operating Capability, by strengthening how we equip and recruit
the best restaurant operators to deliver great customer
experiences, and build and protect our brands;
- Driving Bold Restaurant
Development through partnerships with growth-minded franchisees
who can expand and penetrate markets with modern restaurants,
strong economics and value; and
- Growing Unrivaled Culture and
Talent to strengthen the customer experience and franchise
success with best-in-class people capability and culture.
- More Franchised. Partnering with
growth-minded franchisees, Yum! Brands will increase franchise
restaurant ownership from 77% currently to 93% at the time of the
separation of the China business to at least 98% by fiscal year
ending 2018, with a focus on equipping and recruiting the best
restaurant operators in the world to deliver great customer
experiences and drive brand growth.
- More Efficient. The Company will
revamp its financial profile, improving the efficiency of its
organization and cost structure globally, by:
- Reducing annual capital expenditures
from ~$500 million (2015 Pro Forma post-separation) to ~$100
million (FYE 2019);
- Reducing G&A by a cumulative ~$300
million by FYE 2019; and
- Maintaining optimized capital structure
of ~5.0x EBITDA leverage.
Mr. Creed continued, “The separation of our China business
provided a once-in-a-lifetime opportunity to review our operating
model and consider all possibilities available under our new
structure. The transformed Yum! Brands will maintain its geographic
diversity with continued, meaningful exposure to the growth
potential of the world’s largest consumer market, China, but with
greater revenue stability by leveraging our four growth drivers. We
will reinforce the distinctiveness of our brands and their
relevance to customers, select the highest potential franchisees
and help drive their success, expand more profitably in key markets
across the globe and bolster training and talent initiatives to
foster the culture that will be especially critical as we evolve
into a highly franchised growth company.”
Capital Return Program Update
Following through on its previously announced plan to return
$6.2 billion of capital to shareholders (excluding dividends) in
connection with the separation of its China business, Yum! Brands
has repurchased approximately $5.5 billion in shares at an average
price of approximately $81, reducing its share count by
approximately 16% as of October 10, 2016. The Company is also
expanding its plan to return capital to shareholders and now
expects to return a total of $13.5 billion (including dividends)
between Q4 2015 and 2019.
Separation of the China Business
After the separation of the China business, Yum China Holdings,
Inc. will become a licensee of Yum! Brands in Mainland China. Yum
China will have exclusive rights to KFC, China’s leading
quick-service restaurant concept, Pizza Hut, the leading casual
dining brand, and Taco Bell, which is expanding globally but is not
yet in China. It will also own the Little Sheep and East Dawning
concepts. Yum China has more than 7,300 restaurants and more than
400,000 employees in over 1,100 cities, and generated over $8
billion in system sales in 2015. The standalone company, Yum China,
is expected to begin trading “regular way” on the New York Stock
Exchange under the symbol “YUMC” on November 1, 2016.
In addition to Mr. Creed and other senior Yum! Brands leaders,
the Yum China leadership team will also speak at the investor
conference about their growth plans, as described in a release
issued separately today.
Today’s presentations can be followed live via webcast beginning
at 8:00 a.m. EDT at: http://edge.media-server.com/m/p/8vmtxvkm.
About Yum! Brands
Yum! Brands, Inc., based in Louisville, Kentucky, has more than
43,000 restaurants in almost 140 countries and territories. Yum!
Brands is ranked #218 on the Fortune 500 List with revenues of over
$13 billion in 2015 and is one of the Aon Hewitt Top Companies for
Leaders in North America. The Company’s restaurant brands - KFC,
Pizza Hut and Taco Bell - are the global leaders of the chicken,
pizza and Mexican-style food categories. Worldwide, the Yum! Brands
system opens over six new restaurants per day on average, making it
a leader in global retail development.
Cautionary Statement Regarding Forward-Looking
Statements
Certain statements in this communication contain
“forward-looking statements.” Forward-looking statements can be
identified by the fact that they do not relate strictly to
historical or current facts. These statements often include words
such as “may,” “will,” “estimate,” “intend,” “seek,” “expect,”
“project,” “anticipate,” “believe,” “plan,” “could,” “target,”
“predict,” “likely,” “should,” “forecast,” “outlook,” “model,”
“ongoing” or other similar terminology. Forward-looking statements
are based on our current expectations, estimates, assumptions or
projections concerning future results or events, including, without
limitation, the planned separation of the Yum! Brands and Yum China
businesses, the timing of such separation, the future earnings and
performance as well as capital structure of Yum! Brands or any of
its businesses, including the Yum! Brands and Yum China businesses
on a stand-alone basis if the separation is completed and the
intended future plans and expectations for Yum! Brands following
the separation of the China businesses as described in this news
release. Forward-looking statements are neither predictions nor
guarantees of future events, circumstances or performance and are
inherently subject to known and unknown risks, uncertainties and
assumptions that could cause our actual results to differ
materially from those indicated by those statements. We cannot
assure you that any of our expectations, estimates or projections
will be achieved. Factors that could cause actual results and
events to differ materially from our expectations and
forward-looking statements are, in addition to those noted above,
included in reports filed with the SEC by Yum! Brands from time to
time, including those discussed under the heading “Risk Factors” in
our most recently filed reports on Form 10-K and 10-Q, as well as
in the Form 10 filed with the SEC by Yum China. You should not
place undue reliance on forward-looking statements, which speak
only as of the date hereof. We are not undertaking to update any of
these statements.
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version on businesswire.com: http://www.businesswire.com/news/home/20161011005819/en/
Yum! Brands, Inc.Analysts:Keith Siegner, 888-298-6986Vice
President, Investor Relations and Corporate StrategyorElizabeth
Grenfell, 888-298-6986Director Investor RelationsorMedia:Virginia
Ferguson, 502-874-8200Director Public Relations
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