Yum! Brands (YUM) Tops Q1 EPS by 8c; China Comps Fell 6%, ex. FX

Yum! Brands (NYSE: YUM) reported Q1 EPS of $0.80, $0.08 better than the analyst estimate of $0.72. Revenue for the quarter came in at $2.62 billion versus the consensus estimate of $2.64 billion.

Worldwide system sales grew 4%. Worldwide restaurant margin decreased 1.7 percentage points to 17.5%, and worldwide operating profit decreased 8%.

Greg Creed, CEO, said “While EPS declined in the first quarter, I’m pleased with the strong performance from our KFC and Taco Bell Divisions, as well as the continued progress we are making in China. I’m confident we will deliver full-year EPS growth of at least 10%, with a strong second half in China and solid brand-building initiatives underway at each of our divisions.

Our confidence in China is bolstered by improving sales and upward momentum in customer perceptions. China Division restaurant margins were a healthy 19% even though same-store sales declined 12%, reinforcing our belief in significant operating leverage as sales recover. We remain on track to open at least 700 new restaurants in China this year with strong returns, laying the groundwork for future growth.

Outside of China, our KFC and Taco Bell Divisions are firing on all cylinders. These powerhouse brands produced both strong sales growth and significant margin expansion. KFC delivered 5% same-store sales growth, including an improving U.S. business. Taco Bell continued to go from strength to strength with 6% same-store sales growth, led by industry-leading innovation and a solid breakfast platform. At Pizza Hut, our sales performance was relatively flat, but plans are in place to get the business back on track.

Importantly, we’re on pace to set a new record in international development this year, opening 2,100 new restaurants and extending our lead in emerging markets. We expect overall operating results will enable us to achieve targeted earnings growth this year, despite strengthening headwinds from foreign currency translation.

Our central goal remains building three iconic, global brands people trust and champion. We remain focused on the three keys to driving shareholder value: same-store sales growth, new-unit development and generating high returns on invested capital. I believe this combination of efforts will enable us to reestablish our track record of consistently delivering double-digit EPS growth in 2015 and the years ahead.”

CHINA DIVISION

• China Division same-store sales for the quarter were significantly impacted by adverse publicity in July 2014 surrounding improper food handling practices by a former supplier.
• China Division system sales decreased 6%, prior to foreign currency translation.
  • Same-store sales declined 12%, including declines of 14% at KFC and 6% at Pizza Hut Casual Dining.
• China Division opened 171 new units during the quarter.

For earnings history and earnings-related data on Yum! Brands (YUM) click here.

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