Yum: 2Q earnings on track with growth targets

Yum: 2Q earnings on track with growth targets

Yum! Brands Inc.’s same-store sales in China in the second quarter logged their lowest increase in more than a year, but the company’s domestic same-store sales meanwhile have rebounded to their most robust level in some time, allowing the company to reaffirm its earnings growth targets for fiscal 2012.

Yum’s net income for the June 16-ended quarter rose 5 percent to $331 million, or 69 cents per share, compared with $316 million, or 65 cents per share, a year earlier.

Revenue increased 12 percent to $3.17 billion, from $2.82 billion a year earlier, comprising same-store sales gains of 10 percent in China, 4 percent in its Yum Restaurants International (YRI) division, 7 percent in the United States and 7 percent in India.

Chief executive David Novak credited Louisville, Ky.-based Yum’s new-unit development and same-store sales growth with increasing the company’s operating profit 8 percent during the quarter.

“Our U.S. business increased operating profit 26 percent in the second quarter and drove our overall operating profit growth,” he said. “We expect China and Yum Restaurants International, or YRI, to drive our second-half profit growth. Based on our first-half results and current solid sales trends, we reconfirm our full-year guidance of at least 12-percent earnings per share growth.”

In the United States, same-store sales at Yum’s Taco Bell division rose 13 percent, rolling over a 5-percent decline from the second quarter of 2011, when the chain was still dealing with a consumer lawsuit. The brand had said previously that an expected double-digit gain in same-store sales would be due in large part to the successful launch of its Doritos Locos Tacos item.

Domestic same-store sales also rose 4 percent at Pizza Hut and 1 percent at KFC.

Yum opened 160 restaurants in China during the quarter and expects to open 700 units in that country this year.

In its YRI division, Yum opened 172 locations in 45 countries during the quarter. Emerging markets like Africa, the Middle East and Russia led the way for YRI’s sales growth, contributing a collective 9-percent same-store sales gain to make up for a less robust 1-percent increase in developed markets.

The company’s India division, which began reporting its results as a separate business unit this year, has grown its unit count 29 percent since the end of the year-earlier second quarter. The division now has 212 KFC locations and 264 Pizza Hut restaurants.

Yum operates or franchises nearly 38,000 restaurants in 120 countries.

Contact Mark Brandau at [email protected] [6].
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