LOUISVILLE Ky. Yum! Brands Inc., parent of Taco Bell, Pizza Hut, KFC and other quick-service chains, reported a 4.4-percent increase in third-quarter net income as total revenue rose 10.6 percent to $2.84 billion on the strength of international business, especially the company’s operations in China.
Yum’s domestic business did not fare as well.
The U.S. division posted a 15.5-percent drop in operating profit for the third quarter ended Sept. 6, on reduced margins and a smaller store count from a year ago. Yum predicted that its annual domestic profit would fall about 8 percent year over year because of increased commodity costs and the depressed economic environment.
Third-quarter systemwide same-store sales for its U.S.-based restaurants rose 3 percent. Corporate same-store-sales growth of 4 percent was led by positive results at Taco Bell and Pizza Hut, the company reported, but offset by a 4-percent decline at KFC.
“Our KFC U.S. business continues to lag the rest of our global portfolio and is the driver of our underperforming profit in the U.S. business,” Yum chairman and chief executive David Novak said in a statement. “We expect to turn around KFC performance in 2009 with the introduction of our successfully-tested Kentucky Grilled Chicken.”
Third-quarter corporate net income totaled $282 million, or 58 cents per share, compared with $270 million, or 50 cents a share, in the same quarter a year ago. Yum said its international growth, a favorable tax rate, and a 10-percent reduction in the number of Yum shares outstanding helped to offset the weak U.S. results.
Its earnings beat securities analysts’ average forecast of 54 cents a share, according to data from Thomson Financial.
Worldwide, same-store sales rose 3 percent, and reflected gains of 5 percent in mainland China, 4 percent in the company’s international division and the 3-percent jump in the United States.
While operating profit in China rose about 19 percent, the region’s restaurant margins dipped by about 2.3 percent, the company said. Food cost inflation, especially for chicken, and labor inflation were blamed.
Yum said it continued to expect a 12-percent growth in per-share earnings for the full year, or earnings of $1.89 per share. Last year, the company earned $1.68 per share.
The company operates or franchises more than 35,000 restaurants worldwide, including about 17,825 in the United States.