Yum Profit Tops Estimates as International Sales IncreaseLeslie Patton
Yum! Brands Inc., owner of the KFC and Taco Bell fast-food chains, posted fourth-quarter profit that exceeded analysts’ estimates on sales gains at its international division.
Profit excluding some items was 86 cents a share, the Louisville, Kentucky-based company said yesterday in a statement. Analysts estimated about 79 cents, on average. Revenue rose 0.6 percent to $4.18 billion, trailing analysts’ projections.
While Yum’s KFC restaurants have been struggling to attract diners in China, the company has been expanding in emerging markets as well as boosting sales in nations including Russia and France. Yum gets about a quarter of its revenue from its international division, where sales at restaurants open at least a year rose 2 percent in the quarter. Analysts estimated a gain of 1.7 percent, according to Consensus Metrix.
“We remain extremely bullish on our long-term prospects in emerging markets as a consuming class rapidly expands,” Chief Executive Officer David Novak said during a conference call today. In the past year, the company opened its first stores in Tanzania, Ukraine, Argentina and Mongolia, and will open about 1,000 new international division locations in 2014, he said.
Yum jumped 8.9 percent to $72.06 at the close in New York for the biggest gain since Oct. 28, 2008. The shares have dropped 4.7 percent this year, compared with a 5.6 percent decline for the Standard & Poor’s 500 Restaurants Index.
The company reiterated its full-year forecast for at least a 20 percent increase in profit per share, excluding certain items.
Fourth-quarter net income fell 4.7 percent to $321 million, or 70 cents a share, from $337 million, or 72 cents, a year earlier, the company said.
Strong results in the Middle East, Africa and Russia helped fourth-quarter sales, Jonathan Blum, a company spokesman, said in a phone interview. KFC has appealed to different tastes with local foods -- in Russia, the chain sells potato wraps, panini-style sandwiches and apple-filled pastries.
Same-store sales in the fourth quarter declined 4 percent in China as KFC tries to lure back diners after an outbreak last year of bird flu and the investigation of a former supplier for selling food with too much antibiotics. Recently, more cases of H7N9 avian influenza have been reported in mainland China and Hong Kong.
In November, KFC introduced a Chinese advertising campaign about quality assurance that featured store employees and poultry farmers. Last year it also offered a half-price chicken-bucket deal to help attract diners and boost flagging sales.
U.S. comparable-store sales at Yum stores fell 2 percent in the quarter as sales slipped at Pizza Hut and KFC. Comparable-store sales are considered an indicator of growth because they include only older, established locations.
Restaurant competition in the U.S. has picked up as fast-food chains, including McDonald’s Corp., have struggled to attract customers amid shaky consumer confidence and steep discounts. Last month, the world’s largest restaurant company posted fourth-quarter profit that was little changed as U.S. same-store sales fell 1.4 percent.
Yum has more than 40,000 restaurants worldwide.