Yum! Brands Inc., parent company of KFC, Taco Bell and Pizza Hut, has reported that its growth for the third quarter ended Sept. 5 was driven by new stores in the U.S. and especially China markets.
Though same-store sales in mainland China were flat, the company opened 88 new restaurants there this quarter, leading to a system sales growth of 10 percent. This helped offset a decline in U.S. same-store sales, which dropped 6 percent. The drop in U.S. comps included a 13 percent decline at Pizza Hut.
The international division's system sales growth of 4 percent also was driven by new units. Same-store sales were flat.
Revenues for the quarter were down 2 percent at $2.78 billion, compared to $2.84 billion this time last year. Year to date, revenues were down 6 percent at $7.47 billion, compared to $7.91 billion last year.
Despite some lower numbers, overall net income was up due to aggressive international expansion. Income increased 18 percent at $334 million, compared with $282 million in the same period last year. Year-to-date net income is $855 million, up 12 percent from $760 million last year.
"Our China business generated extraordinary operating profit growth of 32 percent in the third quarter," said David C. Novak, Yum! chairman and CEO, in a news release. "We leveraged our high-return, new unit development and increased restaurant margin over two points. We are especially pleased that our China team achieved margins near record levels with high average unit volumes."
Yum! is on track to open more than 475 new units in mainland China, where KFC has little compeitition from other U.S. QSR brands in the vast majority of the 600 cities in which we have a presence.
Novak attributed the corporation's strong operating profit growth to substantial improvements in "restaurant margin and significant G&A savings which offset a 6 percent same-store-sales decline.
"There's no question the overall worldwide environment continues to be challenging," he said. "However, we are more confident than ever in the consistent earnings power of our global portfolio. We also continue to make major progress developing our significant, new sales layers which will better leverage our assets and drive future growth."
