Yum Profit Rises as Chinese Customers Return to KFC

Chinese consumers are loving KFC fried chicken again.

Yum! Brands Inc. (YUM), owner of the KFC and Taco Bell restaurant chains, said yesterday that first-quarter profit rose 18 percent as sales rebounded in China. Sales at stores open at least 12 months jumped 9 percent in the Asian nation after falling for five straight quarters.

The results show that the damage done by an avian flu outbreak and an investigation into the company’s supply chain last year has begun to fade. The company, which gets about half its revenue from China, has reassured consumers its food is safe to eat with a KFC quality assurance ad campaign. It’s also working on new foods and marketing to entice customers there.

KFC’s new Chinese menu, which has 15 new items, is resonating with diners and helping boost sales, Chief Executive Officer David Novak said in a statement yesterday. That’s helping give Yum the confidence to open at least 700 new restaurants in the Asian nation this year, he said.

Yum fell 0.9 percent to $76.81 at the close in New York. The shares have gained 1.6 percent this year, compared with a 2.3 percent drop for the Standard & Poor’s 500 Restaurants Index.

Net income advanced to $399 million, or 87 cents a share, from $337 million, or 72 cents, a year earlier, the Louisville, Kentucky-based chain said in the statement. Analysts estimated 84 cents a share, the average of 21 projections compiled by Bloomberg.

Photographer: David Paul Morris/Bloomberg

Yum! Brands Inc., owner of the KFC and Taco Bell restaurant chains, said yesterday that first-quarter profit rose 18 percent as sales rebounded in China. Close

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Photographer: David Paul Morris/Bloomberg

Yum! Brands Inc., owner of the KFC and Taco Bell restaurant chains, said yesterday that first-quarter profit rose 18 percent as sales rebounded in China.

Revenue rose 7.5 percent to $2.72 billion in the quarter. Analysts estimated $2.79 billion, on average.

The company reiterated its full-year forecast for at least a 20 percent increase in profit per share, excluding certain items.

Taco Bell

Yum also has been working to improve its Taco Bell domestic business. Last month, it rolled out breakfast fare, including waffle tacos, across its U.S. stores, and also is preparing a mobile-phone payment and ordering system.

Comparable-store sales rose 1 percent for KFC, fell 2 percent at Pizza Hut and dropped 1 percent at Taco Bell. In the company’s India division, same-store sales also declined 1 percent. Same-store sales are considered an indicator of retailer’s performance because they include only older, established locations.

There are more than 40,000 Yum Brands stores globally, of which the company owns about 20 percent.

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

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net Kevin Orland, John Lear

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