Yum Boosts Its Profit Forecast, Helped by China Rebound
14 July 2016 - 7:30AM
Dow Jones News
By Maria Armental
Yum Brands Inc. on Wednesday raised its projection for core
operating profit growth, citing the rebound of its China business
during the first half of the year.
Louisville, Ky.-based Yum, which said Wednesday that it expects
to complete the spinoff of the China business by Oct. 31, now
projects core operating profit, adjusted for currency conversion,
to increase 14% from a year earlier, compared with its earlier view
of 12% growth.
Shares, up 17% this year, rose 4% to $89 in after-hours
trading.
The China business, which accounts for about half of Yum's
revenue, reported an 3% system sales increase, adjusted for
currency conversions.
But Pizza Hut, which company officials have said accounts for
about one-quarter of the company's operating profit in China,
remains a concern. Sales at Pizza Huts open for at least a year
contracted 11% in the second quarter and dragged down the
division's key comparable-sales metric to even with the year-ago
period.
However, company officials said comparable sales at Pizza Hut
have increased from the year-ago period so far this quarter.
Restaurant margin, meanwhile, improved 1.1 percentage points to
15.7%.
Yum, which has pledged to return $6.2 billion to shareholders
before the spinoff is complete, was the first major Western
fast-food company in China. It opened a KFC near Beijing's
Tiananmen Square in 1987 and built the brand into the largest
foreign-restaurant chain in the country.
Over all, for the period ended June 11, Yum reported a profit of
$339 million, or 81 cents a share, compared with $235 million, or
53 cents a share, a year earlier. Excluding costs related to the
planned separation of the China business and other items, profit
rose to 75 cents a share from 69 cents a year earlier.
Revenue, which includes franchise and license fees, fell 3% to
$3.01 billion. It was the third consecutive quarterly decline.
Analysts surveyed by Thomson Reuters had projected 74 cents a
share on $3.09 billion in revenue.
System sales at KFC rose 6% in the latest quarter, also adjusted
for currency conversions, while Taco Bell reported a 2% increase
and Pizza Hut a 1% increase.
On a comparable-sales basis, Yum reported results were even from
the year-ago period as KFC helped offset lower sales at Taco Bell.
Analysts surveyed by FactSet, however, had projected a 1.7%
increase.
Write to Maria Armental at maria.armental@wsj.com
(END) Dow Jones Newswires
July 13, 2016 17:15 ET (21:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
Yum Brands (NYSE:YUM)
Historical Stock Chart
From Aug 2024 to Sep 2024
Yum Brands (NYSE:YUM)
Historical Stock Chart
From Sep 2023 to Sep 2024