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Int'l growth drives 1st-Q profit jump for Yum

LOUISVILLE Ky. Yum! Brands Inc. reported a 31-percent surge in first-quarter profit, as double-digit growth in sales overseas, and especially in China, offset pressures still faced in Yum’s domestic operations.

In the United States, Yum’s Taco Bell, Pizza Hut, KFC and A&W brands were still hurt by increased cost pressures and slow sales. U.S. operating profit declined 5 percent year-to-year during Yum’s first quarter ended March 22. The company said commodities costs increased $25 million from the previous year.

Corporate locations, which Yum is working to decrease through refranchising efforts, posted a 2-percent drop in restaurant sales. Bright spots in the United States included a blended systemwide same-store sales increase of 3 percent, up from a same-store sales dip of 3 percent a year ago.

The quick-service operator or franchisor of more than 35,000 restaurants no longer provides brand by brand results, nor did it provide details on what drove sales in the United States. Most recently, the company has worked to rebrand its Pizza Hut and KFC brands with new products and advertising. It also is working to introduce breakfast and a frozen beverage line at Taco Bell.

First-quarter net income totaled $254 million, or 50 cents a share, up from year-ago earnings of $194 million, or 35 cents a share. Latest-quarter results included a one-time gain from the sale of a minority interest in KFC Japan, a pre-tax charge of $26 million related to refranchising in the United States, and a pre-tax charge of $6 million related to U.S. restructuring, the company said.

Systemwide revenue grew to $2.4 billion, up from $2.2 billion a year earlier, the company said.

The results beat a prediction by analysts polled by Thomson Financial that earnings would be 40 cents per share on revenue of $2.35 billion.

Yum’s corporate quarterly growth was spurred by overseas restaurant expansion and sales increases, the company said. Worldwide same-store sales increased 4 percent, reflecting gains of 12 percent in mainland China and 5 percent in Yum’s international division, which includes overseas operations outside of Chain.

Total system sales rose 40 percent in mainland China and 15 percent in the international division, the company reported.

David Novak, Yum chairman and chief executive, said in a statement that significant commodity pressure is challenging U.S. profits but that he is confident that sustainable growth will be achieved. He also noted that Yum repurchased a record $1 billion in shares during the quarter. The company also raised its full-year, per-share earnings growth outlook to an expected year-to-year increase of 11 percent, up from 10 percent previously expected, excluding special items.

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