Louisville / KY. (yb) Yum! Brands Inc. reported results for the fourth quarter ended December 26, 2015. Fourth-quarter EPS excluding Special Items was 0.68 USD, an increase of 11 percent. Reported EPS was 0.63 USD for the quarter and 2.92 USD for the year.
Fourth-Quarter Highlights
- Worldwide system sales grew 6 percent. Worldwide restaurant margin increased 3.4 percentage points to 13.6 percent. Worldwide operating profit increased 17 percent.
- New global restaurants totalled 1’160, including 384 in China, 374 at KFC, 270 at Pizza Hut, 109 at Taco Bell and 23 in India; 83 percent of international development occurred in emerging markets.
- China Division system sales increased 7 percent, driven by 7 percent unit growth and 2 percent same-store sales growth. Restaurant margin increased 4.3 percentage points to 11.4 percent. Operating profit increased 207 percent.
- KFC Division system sales increased 6 percent, driven by 3 percent unit growth and 3 percent same-store sales growth. Operating margin increased 0.4 percentage points to 22.4 percent. Operating profit increased 7 percent.
- Pizza Hut Division system sales increased 2 percent, driven by 1 percent unit growth and 1 percent same-store sales growth. Operating margin increased 1.0 percentage point to 23.4 percent. Operating profit increased 6 percent.
- Taco Bell Division system sales increased 7 percent, driven by 3 percent unit growth and 4 percent same-store sales growth. Operating margin decreased 2.7 percentage points to 25.0 percent. Operating profit decreased 7 percent.
- India Division system sales decreased 9 percent, driven by a 13 percent same-store sales decline.
- Worldwide effective tax rate decreased to 29.4 percent from 30.0 percent.
- Foreign currency translation negatively impacted operating profit by 37 million USD.
Full-Year Highlights
- Worldwide system sales grew 5 percent. Worldwide restaurant margin increased 1.5 percentage points to 16.0 percent. Worldwide operating profit increased 7 percent.
- New global restaurants totalled 2’365, including 743 in China, 715 at KFC, 577 at Pizza Hut, 276 at Taco Bell and 54 in India; 80 percent of international development occurred in emerging markets.
- China Division system sales increased 2 percent, driven by 7 percent unit growth and partially offset by a 4 percent same-store sales decline. Restaurant margin increased 1.1 percentage points to 15.9 percent. Operating profit increased 8 percent.
- KFC Division system sales increased 7 percent, driven by 3 percent unit growth and 3 percent same-store sales growth. Operating margin increased 0.8 percentage points to 23.0 percent. Operating profit increased 8 percent.
- Pizza Hut Division system sales increased 2 percent, driven by 1 percent unit growth and 1 percent same-store sales growth. Operating margin decreased 0.4 percentage points to 25.2 percent. Operating profit increased 1 percent.
- Taco Bell Division system sales increased 8 percent, driven by 3 percent unit growth and 5 percent same-store sales growth. Operating margin increased 1.3 percentage points to 27.1 percent. Operating profit increased 12 percent.
- India Division system sales decreased 5 percent, driven by a 13 percent same-store sales decline.
- Worldwide effective tax rate increased to 25.6 percent from 25.5 percent.
- Foreign currency translation negatively impacted operating profit by 107 million USD.
Note: All comparisons are versus the same period a year ago and exclude Special Items unless noted. System sales and operating profit figures on this page exclude foreign currency translation; restaurant margin and operating margin figures are as reported.
Summary Financial Table
Q4/2015 | Q4/2014 | Change | FY-2015 | FY-2014 | Change | |||||||||||||
EPS Excluding Special Items | 0.68 USD | 0.61 USD | 11 % | 3.18 USD | 3.09 USD | 3 % | ||||||||||||
Special Items Gain/(Loss) | (0.05) USD | (0.81) USD | NM | (0.26) USD | (0.77) USD | NM | ||||||||||||
EPS | 0.63 USD | (0.20) USD | NM | 2.92 USD | 2.32 USD | 26 % |
Greg Creed Commends
Greg Creed, CEO, said, «I’m pleased with the positive sales momentum we generated across the majority of Yum! in the fourth quarter. KFC China, for example, grew same-store sales 6 percent in the last quarter of 2015. Outside of China, each of our brand divisions grew same-store sales on a one-year and a two-year basis. Our U.S. results were particularly strong on a two-year basis, with growth of 2 percent at Pizza Hut, 8 percent at KFC and 10 percent at Taco Bell».
«Fourth-quarter EPS grew 11 percent, with full-year EPS growth of 3 percent despite a 7 percent decline in the first half and six percentage points of foreign currency headwinds. For the full year, our brand divisions collectively grew operating profit 8 percent in constant currency, led by 12 percent operating profit growth at Taco Bell. Operating profit grew 8 percent in constant currency in China with impressive cost management partially offsetting weaker than originally anticipated sales results».
«New-unit development continues to be a bright spot for our company. We added more than 2’300 new units globally in 2015. This year we expect to open nearly 2’400 new restaurants, which means we’re opening over six new restaurants a day, laying the groundwork for future growth. With all of this in mind, we are reiterating the guidance we initially gave in December. Given the results we have seen year-to-date and the plans we have laid out for each of the brands, we’re confident in our ability to deliver 10 percent operating profit growth in constant currency in 2016».
«2016 will be a transformational year for Yum! as we are on track to complete the spin-off of our China Division, ultimately creating two powerful, independent, focused growth companies. The fundamental goal of Yum!, however, is unchanged. We are 100 percent dedicated to building and strengthening KFC, Pizza Hut and Taco Bell all around the world, as strong brands are critical to delivering sustained growth and creating shareholder value over the long term».
China Division
Q4/2015 | Q4/2014 | Reported | Ex F/X | FY-2015 | FY-2014 | Reported | Ex F/X | |||||||||||||||||
System Sales Growth | +3 | +7 | Even | +2 | ||||||||||||||||||||
Same-Store Sales Growth ( percent) | +2 | (16) | NM | NM | (4) | (5) | NM | NM | ||||||||||||||||
Franchise + License Fees (MM USD) | 37 | 33 | +12 | +16 | 120 | 113 | +7 | +9 | ||||||||||||||||
Restaurant Margin ( percent) | 11.4 | 7.1 | 4.3 | 4.3 | 15.9 | 14.8 | 1.1 | 1.0 | ||||||||||||||||
Operating Profit (MM USD) | 96 | 32 | +195 | +207 | 757 | 713 | +6 | +8 |
- China Division system sales increased 7 percent for the quarter and 2 percent for the year, excluding foreign currency translation.
- KFC same-store sales increased 6 percent for the quarter and declined 4 percent for the year.
- Pizza Hut Casual Dining same-store sales declined 8 percent for the quarter and 5 percent for the year.
- China Division opened 384 new restaurants in the quarter. For the year, China Division opened 743 new restaurants, including 351 at KFC, 280 at Pizza Hut Casual Dining and 75 at Pizza Hut Home Service.
China Units | Q4/2015 | Change | ||||
Restaurants | 7’176 | +7% | ||||
KFC | 5’003 | +4% | ||||
Pizza Hut | ||||||
Casual Dining | 1’572 | +20% | ||||
Home Service | 331 | +28% | ||||
Total includes East Dawning and Little Sheep units. |
- Restaurant margin increased 4.3 percentage points to 11.4 percent for the quarter driven by productivity initiatives and KFC sales leverage. Restaurant margin increased 1.1 percentage points to 15.9 percent for the year driven by productivity initiatives, partially offset by sales deleverage.
- Foreign currency translation negatively impacted operating profit by 4 million USD for the quarter and 15 million USD for the year.
KFC Division
Q4/2015 | Q4/2014 | Reported | Ex F/X | FY-2015 | FY-2014 | Reported | Ex F/X | |||||||||||||||||
Restaurants | 14’577 | 14’197 | +3 | NA | 14’577 | 14’197 | +3 | NA | ||||||||||||||||
System Sales Growth | (5) | +6 | (4) | +7 | ||||||||||||||||||||
Same-Store Sales Growth ( percent) | +3 | +4 | NM | NM | +3 | +3 | NM | NM | ||||||||||||||||
Franchise + License Fees (MM USD) | 263 | 277 | (5) | +7 | 842 | 873 | (4) | +7 | ||||||||||||||||
Restaurant Margin ( percent) | 14.7 | 13.8 | 0.9 | 0.8 | 14.8 | 13.3 | 1.5 | 1.4 | ||||||||||||||||
Operating Profit (MM USD) | 206 | 221 | (7) | +7 | 677 | 708 | (4) | +8 | ||||||||||||||||
Operating Margin ( percent) | 22.4 | 22.0 | 0.4 | 0.3 | 23.0 | 22.2 | 0.8 | 0.4 |
- KFC Division system sales increased 6 percent for the quarter and 7 percent for the year, excluding foreign currency translation.
Emerging Markets | Developed Markets | U.S. | ||||||||||||||||
Q4 | Full Year | Q4 | Full Year | Q4 | Full Year | |||||||||||||
System Sales Growth (Ex F/X) | +10 | +11 | +6 | +6 | +1 | +2 | ||||||||||||
Same-Store Sales Growth | +2 | +3 | +3 | +3 | +3 | +4 |
- KFC Division opened 370 new international restaurants during the quarter.
- For the year, KFC Division opened 705 new international restaurants in 85 countries, including 524 units in emerging markets. 85 percent of these new units were opened by franchisees.
- Operating margin increased 0.4 percentage points for the quarter and 0.8 percentage points for the year driven by same-store sales growth and new-unit development.
- Foreign currency translation negatively impacted operating profit by 31 million USD for the quarter and 85 million USD for the year, as approximately 90 percent of division profits are generated outside the U.S.
KFC Markets | KFC System Sales | System Sales Growth Ex F/X | |||||||
Q4 ( percent) | Full Year ( percent) | ||||||||
Emerging Markets | |||||||||
Asia (e.g. Malaysia, Indonesia, Philippines) | 8 percent | +8 | +6 | ||||||
Africa | 6 percent | +4 | +9 | ||||||
Latin America (e.g. Mexico, Peru) | 6 percent | +7 | +8 | ||||||
Middle East / North Africa | 6 percent | +3 | +3 | ||||||
Russia | 5 percent | +35 | +42 | ||||||
Thailand | 3 percent | +6 | +6 | ||||||
Continental Europe (e.g. Poland) | 3 percent | +12 | +13 | ||||||
Developed Markets | |||||||||
U.S. | 24 percent | +1 | +2 | ||||||
Australia | 10 percent | +7 | +9 | ||||||
Asia (e.g. Japan, Korea, Taiwan) | 9 percent | +7 | +5 | ||||||
U.K. | 9 percent | +2 | +3 | ||||||
Continental Europe (e.g. France, Germany) | 7 percent | +11 | +9 | ||||||
Canada | 3 percent | +4 | +2 | ||||||
Latin America (e.g. Puerto Rico) | 1 percent | +3 | +3 |
Pizza Hut Division
Q4/2015 | Q4/2014 | Reported | Ex F/X | FY-2015 | FY-2014 | Reported | Ex F/X | |||||||||||||||||
Restaurants | 13’728 | 13’602 | +1 | NA | 13’728 | 13’602 | +1 | NA | ||||||||||||||||
System Sales Growth | (2) | +2 | (2) | +2 | ||||||||||||||||||||
Same-Store Sales Growth ( percent) | +1 | Even | NM | NM | +1 | (1) | NM | NM | ||||||||||||||||
Franchise + License Fees (MM USD) | 169 | 167 | Even | +5 | 536 | 541 | (1) | +3 | ||||||||||||||||
Restaurant Margin ( percent) | 9.6 | 6.4 | 3.2 | 2.4 | 9.7 | 8.2 | 1.5 | 1.0 | ||||||||||||||||
Operating Profit (MM USD) | 81 | 80 | +3 | +6 | 289 | 295 | (2) | +1 | ||||||||||||||||
Operating Margin ( percent) | 23.4 | 22.4 | 1.0 | 0.6 | 25.2 | 25.6 | (0.4) | (0.6) |
- Pizza Hut Division system sales increased 2 percent for both the quarter and the year, excluding foreign currency translation.
Emerging Markets | Developed Markets | U.S. | ||||||||||||||||
Q4 | Full Year | Q4 | Full Year | Q4 | Full Year | |||||||||||||
System Sales Growth (Ex F/X) | +7 | +7 | Even | +1 | +2 | +1 | ||||||||||||
Same-Store Sales Growth | +3 | +3 | (1) | (1) | +2 | +1 |
- Pizza Hut Division opened 223 new international restaurants during the quarter.
- For the year, Pizza Hut Division opened 429 new international restaurants in 64 countries, including 243 units in emerging markets. 92 percent of these new units were opened by franchisees.
- Operating margin increased 1.0 percentage point for the quarter led by an increase of 3.2 percentage points in restaurant margin. For the year, operating margin decreased 0.4 percentage points driven by strategic investments in international G+A.
- Foreign currency translation negatively impacted operating profit by 2 million USD for the quarter and 8 million USD for the year.
Pizza Hut Markets | Pizza Hut System Sales | System Sales Growth Ex F/X | |||||||
Q4 ( percent) | Full Year ( percent) | ||||||||
Emerging Markets | |||||||||
Latin America (e.g. Mexico, Peru) | 7 percent | +9 | +9 | ||||||
Asia (e.g. Malaysia, Indonesia, Philippines) | 5 percent | +5 | +4 | ||||||
Middle East / North Africa | 5 percent | +5 | +6 | ||||||
Continental Europe (e.g. Poland) | 1 percent | +14 | +11 | ||||||
Developed Markets | |||||||||
U.S. | 55 percent | +2 | +1 | ||||||
Asia (e.g. Japan, Korea, Taiwan) | 9 percent | (2) | (1) | ||||||
U.K. | 7 percent | +4 | +4 | ||||||
Continental Europe (e.g. France, Germany) | 5 percent | +4 | +3 | ||||||
Canada | 3 percent | +7 | +5 | ||||||
Australia | 2 percent | (12) | (8) | ||||||
Latin America (e.g. Puerto Rico) | 1 percent | (12) | (4) |
Taco Bell Division
Q4/2015 | Q4/2014 | Reported | Ex F/X | FY-2015 | FY-2014 | Reported | Ex F/X | |||||||||||||||||
Restaurants | 6’400 | 6’199 | +3 | NA | 6’400 | 6’199 | +3 | NA | ||||||||||||||||
System Sales Growth | +7 | +7 | +8 | +8 | ||||||||||||||||||||
Same-Store Sales Growth ( percent) | +4 | +6 | NM | NM | +5 | +3 | NM | NM | ||||||||||||||||
Franchise + License Fees (MM USD) | 138 | 130 | +7 | +7 | 447 | 411 | +9 | +9 | ||||||||||||||||
Restaurant Margin ( percent) | 23.7 | 20.6 | 3.1 | 3.1 | 22.3 | 18.9 | 3.4 | 3.4 | ||||||||||||||||
Operating Profit (MM USD) | 152 | 163 | (7) | (7) | 539 | 480 | +12 | +12 | ||||||||||||||||
Operating Margin ( percent) | 25.0 | 27.7 | (2.7) | (2.7) | 27.1 | 25.8 | 1.3 | 1.3 |
- Taco Bell Division system sales increased 7 percent for the quarter and 8 percent for the year.
- Taco Bell Division opened 109 new restaurants in the fourth quarter. For the year, Taco Bell Division opened 276 new restaurants; 87 percent of these new units were opened by franchisees.
- Restaurant margin increased 3.1 percentage points to 23.7 percent for the quarter driven by favorable U.S. commodities and same-store sales growth. Restaurant margin increased 3.4 percentage points to 22.3 percent for the year driven by same-store sales growth.
- Operating margin decreased 2.7 percentage points for the quarter driven by an expected increase in G+A related to incentive compensation, investment spending on strategic growth and technology initiatives, legal costs and creation of the Live Más scholarship program. The majority of the increase is either nonrecurring in nature or represents investments to sustain positive brand momentum. This was partially offset by same-store sales growth. For the year, operating margin increased 1.3 percentage points driven by same-store sales growth, partially offset by an increase in G+A primarily attributable to incentive compensation, pension and previously mentioned investments.
India Division
- India Division system sales decreased 9 percent for the quarter and 5 percent for the year, excluding foreign currency translation.
- Operating loss was 4 million USD for the quarter and 19 million USD for the year.
- During the quarter, we refranchised 86 KFC units, reducing equity ownership in India from 25 percent to 15 percent.
India Units | Q4 2015 | Change | ||||
Restaurants | 811 | (3)% | ||||
KFC | 372 | (6)% | ||||
Pizza Hut | ||||||
Casual Dining | 170 | (8)% | ||||
Home Service | 262 | +7% |
Special Items / Share Repurchase Update
- For the fourth quarter in the U.S., we refranchised 36 Taco Bell units and sold real estate related to 19 previously refranchised KFC units, resulting in total proceeds of 75 million USD. We recorded pre-tax U.S. refranchising gains of 51 million USD in Special Items. At the end of the fourth quarter, our company ownership in the U.S. across our three branded divisions was 9 percent.
- During the first quarter of 2015, we reached an agreement with our KFC U.S. franchisees that will give us brand marketing control, as well as an accelerated path to expanded menu offerings, improved assets and an enhanced customer experience. In connection with this agreement, we recognized a Special Items charge of 41 million USD during the fourth quarter, primarily related to the funding of investments for new back-of-house equipment for franchisees.
- In the fourth quarter, we repurchased 11.4 million shares totaling 830 million USD at an average price of 73 USD. For the year, we repurchased 15.9 million shares totaling 1.2 billion USD at an average price of 75 USD, with 420 million shares outstanding as of year end. During 2015, we reduced our outstanding share count by 14 million. For fiscal year 2016 through February 2, 2016, we repurchased 10.8 million shares totaling 749 million USD at an average price of 70 USD.
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