LOUISVILLE Ky. Yum! Brands Inc., the franchisor to Pizza Hut, KFC, Taco Bell and other quick-service brands, posted late Tuesday a 35-percent jump in second-quarter net income, driven by continued growth overseas and a one-time gain from the company’s purchase of the KFC business in Shanghai.
In the United States, Yum Brands said it continued to suffer against declines in consumer spending. Domestic systemwide same-store sales fell 1 percent. While Yum no longer reports chain-specific results, it said same-store sales fell 8 percent at Pizza Hut, but were positive at Taco Bell and KFC. The recent introduction of Kentucky Grilled Chicken led to a “substantial positive turnaround” at KFC, Yum said.
The company’s U.S. division was able to post an 8-percent increase in operating profit, mainly because of reduced costs, including the reduction of $18 million in general and administrative expenses.
Yum said cost-containment would continue to drive U.S. results as sales suffer. It also noted that Pizza Hut, which competes at a higher price-point than typical quick-service chains, would be its biggest challenge.
“There is no question that the consumer is under pressure, making it difficult to drive sales growth,” said David Novak, Yum's chairman and chief executive.
The company reduced its same-store sales outlook for the year, which it said would hurt the U.S. division’s profit expectations. Because of improved worldwide margins and decreased commodity costs, Yum said it still expected to earn $2.10 per share this year, a 10-percent increase from 2008.
For the quarter ended June 13, Yum’s net income totaled $303 million, or 63 cents per share, versus earnings of $224 million, or 45 cents per share, in the same quarter a year ago. The company’s purchase of KFC operations in Shanghai, as well as other one-time items, led to 13-cents-per-share gain in the latest quarter, Yum said.
Latest-quarter corporate revenue fell 7 percent to $2.45 billion, mainly because of unfavorable currency conversions based on a stronger U.S. dollar.
The global franchisor of more than 32,000 restaurants said that worldwide same-store sales rose 3 percent, prior to currency conversion, and that worldwide operating profit rose 11 percent. Improved profit margins, new unit growth, cost management and improved year-over-year commodity pricing helped drive results, the company said.
Contact Sarah E. Lockyer at [email protected].