News

Yum! increases profit prediction for year after solid Q2

July 14, 2016

Yum! Brands has increased its full-year core operating profit growth forecast to 14 percent from the previously predicted 12 percent, according to a company press release, which reported a solid Q2 that resulted in earnings per share of 81 cents or about 7 percent. 

"I'm particularly pleased with the continued sales momentum at KFC China, which delivered better-than-expected same-store sales growth of 3 percent," said Yum! Brands CEO Greg Creed. "This represents our fourth-consecutive quarter of positive same-store sales growth at KFC China, despite the second quarter being our most difficult of the year from a historical sales overlap standpoint.

"Importantly, our China Division is off to a good start in the third quarter for both KFC and Pizza Hut Casual Dining, including a return to positive same-store sales at Pizza Hut Casual Dining in recent weeks."

Creed added that challenging conditions in the U.S. led to softer sales results in this country, although the company's three brand divisions collectively produced core operating profit growth that was up to expectations, leaving the company in good shape overall to deliver on its targets for this year. 

"This is a transformational year for our company as we remain on track to finalize the separation of our China business with a targeted completion date around Oct. 31, 2016, ultimately creating two powerful, independent, focused growth companies," Creed said. 

"Our capital structure is fully in place and we plan to return a significant amount of capital to shareholders, both prior to, and after the spin. I look forward to sharing additional details on the transformative initiatives we are undertaking as we become a more heavily franchised company at our New York investor conference on Tuesday, Oct. 11."

Highlights of Yum! Brands Q2 performance

• 72 percent of international development was in emerging markets.
• 373 new restaurants opened worldwide.
• Operating profit was negatively impacted by $16 million due to foreign currency translation.

In China: 

• Opened 72 new stores.
• Sales increased 3 percent, excluding foreign currency translation.
• Same-store sales were even. 
• KFC same-store sales grew 3 percent.
• Pizza Hut Casual Dining sales dropped 11 percent.
• Operating profit was negatively impacted an additional $14 million due to closures, impairment expense and other factors. 

KFC Division                                                                                                        

• Sales increased 6 percent, excluding foreign currency translation.
• Opened 132 new restaurants internationally, contributing to 0.5 percent operating margin increase. 
• Foreign currency translation decreased operating profit $9 million since 90 percent of KFC profits are made outside U.S.  

Pizza Hut Division

• Sales increased 1 percent, excluding foreign currency translation.
• Opened 84 new restaurants internationally.  
• Foreign currency translation decreased operating margin increase of 3.3 percent, by less than $1 million. 

Taco Bell Division

• Sales increased 2 percent, due to 3 percent unit growth, but offset by 1 percent same-store sales decline.  
• Opened 48 new restaurants. 
• Operating margin increased 0.6 percent.