Yum Profit Rises 73% as Taco Bell Helps U.S. Sales

April 18 (Bloomberg) -- Yum! Brands Inc., owner of the KFC and Pizza Hut restaurant brands, said first-quarter profit rose 73 percent as new menu items at the Taco Bell chain helped U.S. same-store sales rebound. (Source: Bloomberg)

Yum! Brands Inc. (YUM), owner of the KFC and Pizza Hut restaurant brands, said first-quarter profit rose 73 percent as new menu items at the Taco Bell chain helped U.S. same-store sales rebound.

Net income climbed to $458 million, or 96 cents a share, from $264 million, or 54 cents, a year earlier, the Louisville, Kentucky-based company said today in a statement. Profit excluding certain items was 76 cents a share. Analysts projected 73 cents, the average of 22 estimates compiled by Bloomberg.

Chief Executive Officer David Novak has recently sought to boost sales at Taco Bell by selling breakfast foods and more expensive burritos under the “Live Mas” slogan. Sales at Yum’s stores open at least 12 months rose 5 percent in the U.S., the most in more than a year.

“They’ve turned around what had been negative earnings growth in the U.S.,” said Bill Mann, portfolio manager at Motley Fool Asset Management in Alexandria, Virginia. Yum had particularly strong same-store sales growth at Taco Bell, “which has been a laggard for them” in the past, he said.

Yum fell 0.6 percent to $72.48 at 4:49 p.m. in New York after margin deteriorated in China. The shares had gained 24 percent this year through the close of regular trading today.

Restaurant margin in China narrowed to 23.6 percent in the quarter from 25.1 percent a year earlier, due to rising wage and commodity costs, Yum said.

China Sales

Same-store sales in China, where Yum has more than 4,600 locations, rose 14 percent, compared with a gain of 21 percent in the fourth quarter and 13 percent a year ago. Comparable- store sales are an indicator of growth because they include only older locations.

The company increased its forecast for profit excluding some items to a gain of at least 12 percent this year to a minimum of $3.22 a share, compared with a previous forecast for growth of at least 10 percent. Analysts estimate $3.28, on average.

“Results are encouraging for breakfast” at Taco Bell, Jonathan Blum, a Yum spokesman, said in a telephone interview. The company will expand its breakfast offerings, including egg burritos, hash browns and iced coffees, to about 1,000 stores in the second half of this year, from about 800 now, he said.

Revenue rose 13 percent to $2.74 billion in the quarter ended March 24, compared with $2.43 billion a year earlier. Analysts estimated $2.71 billion, on average.

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net

To contact the editor responsible for this story: Kevin Orland at korland@bloomberg.net

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