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Yum posts 12% dip in 4Q profit

LOUISVILLE Ky. Yum! Brands Inc. reported Tuesday a 12-percent drop in fourth-quarter profit as one-time charges for refranchising gains and the restructuring of its U.S. business negatively impacted the company’s bottom line.

The stronger U.S. dollar, which weakens the dollar value of foreign earnings, also hurt Yum, the company said, and will continue to negatively impact the company into 2009. A strengthening dollar has become a concern for many analysts that cover multinational companies like Yum and McDonald’s Corp., both of which in recent years have focused on overseas growth and benefited from a soft dollar.

Yum said it expected a “significant negative impact from foreign currency translation,” in the first quarter of 2009. Its international operations, including China, account for about 60 percent of corporate operating profit. Current first-quarter earnings per share are expected to fall, year-to-year, the company said. Other factors contributing to the projected earnings decline include increased commodity costs, comparisons to a particularly strong quarter in China, and delayed sales gains from U.S. efforts that aren’t anticipated to gain traction until the second half of 2009 — such as the anticipated introduction in April of KFC’s grilled chicken, for example.

For the quarter ended Dec. 27, Yum earned $204 million, or 43 cents per share, compared with year-earlier earnings of $231 million, or 44 cents per share. In the latest quarter, charges totaled 3 cents per share and included $17 million in refranchising gains and $43 million of U.S. restructuring charges and U.S. brand reinvestments, including equipment purchases for the April introduction of grilled chicken at KFC.

Louisville-based Yum operates or franchises about 36,000 restaurants worldwide under the KFC, Taco Bell, Pizza Hut and other brands.

Fourth-quarter revenues increased 4 percent to $3.38 billion, spurred by international development of 630 new restaurants and worldwide same-store-sales growth of 3 percent. In the United States, blended same-store sales rose 2 percent, the company reported, and the division’s operating profit rose 7 percent year over year. The jump was mainly because of refranchising gains, the company noted.

For the full year, Yum’s profit rose 6 percent to $964 million, or $1.96 per share. Revenues increased 8 percent to $11.28 billion.

Contact Sarah E. Lockyer at [email protected].

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