Yum! Brands: reports Q2/2013 EPS declined 16 percent

Louisville / KY. (yb) Yum! Brands Inc. reported results for the second quarter ended June 15, 2013, including EPS of 0,56 USD, excluding Special Items. Reported EPS was 0,61 USD for the quarter. Highlights:

• Worldwide system sales grew one percent, prior to foreign currency translation, including six percent at Yum! Restaurants International (YRI) and two percent in the U.S. System sales declined twelve percent in China.
• China Division sales and profits were significantly impacted by adverse publicity surrounding Avian flu, as well as the residual effect of the December poultry supply incident.
• Same-store sales declined 20 percent in China. Same-store sales grew one percent at YRI and one percent in the U.S.
• Total international development was 315 new restaurants; 76 percent of this development occurred in emerging markets.
• Worldwide restaurant margin declined 2,7 percentage points to 12,5 percent, including a decline of 5,0 percentage points in China. Restaurant margin increased 0,8 percentage points at YRI and 0,8 percentage points in the U.S.
• Worldwide operating profit declined 20 percent, prior to foreign currency translation, including a 63 percent decline in China. Operating profit grew twelve percent at YRI and four percent in the U.S.
• Worldwide effective tax rate, prior to Special Items, decreased to 22,1 percent from 23,9 percent. The decrease in the tax rate positively impacted year-over-year EPS results by two percentage points.
• June same-store sales declined an estimated ten percent for the China Division, improving from a 19 percent decline in May. This included an estimated decline of 13 percent at KFC and six percent growth at Pizza Hut Casual Dining. June sales are included in the China Division´s third-quarter results.

Outlook: Estimated mid-single-digit full-year EPS decline versus prior year, excluding Special Items, remains unchanged. China Division same-store sales are expected to continue to recover over the course of the year and be positive in the fourth quarter.

Chief Executive´s Commentary

David C. Novak, Chairman and CEO: «Second-quarter EPS declined 16 percent, which was generally in line with our expectations. KFC sales and profits in China were significantly impacted by intense media surrounding Avian flu, as well as the residual effect of the December poultry supply incident. The good news is that China sales are recovering as expected. The extensive media surrounding Avian flu in China has subsided and same-store sales at KFC are clearly improving».

«I am pleased with the very strong performance at Pizza Hut Casual Dining, which delivered solid same-store sales growth as we continue to open new units at a record pace. For the total China Division, we remain on track to open at least 700 new units this year. This means we will have opened about 1’600 units over a two-year period. As KFC sales continue to recover, we expect to have solid momentum in China heading into 2014».

«We expect record new-unit openings for Yum! Restaurants International and in India this year. Our emerging market new-unit pipeline is stronger than ever. Additionally, Taco Bell continues to deliver sales growth in the U.S. with industry-leading innovation».

«Our estimated mid-single-digit full-year EPS decline versus prior year remains unchanged. We expect a strong bounce-back year in 2014 as we continue to aggressively invest behind our core strategies and capitalize on the enormous growth opportunities we see around the world».