Louisville / KY. (yb) Yum! Brands Inc. reported results for the third quarter ended September 07, 2013, including EPS of 0,85 USD, excluding Special Items. Reported EPS was 0,33 USD for the quarter, which included a 0,55 USD non-cash charge related to the write-down of Little Sheep intangible assets. Q3/2013 highlights:
- Worldwide system sales grew one percent, prior to foreign currency translation, including five percent growth at Yum! Restaurants International (YRI). System sales declined two percent in China and were flat in the U.S.
- Same-store sales declined eleven percent in China. Same-store sales grew one percent at YRI and were flat in the U.S.
- Total international development was 364 new restaurants; 79 percent of this development occurred in emerging markets.
- Worldwide restaurant margin declined 1,3 percentage points to 17,6 percent, including declines of 1,9 percentage points in China, 0,6 percentage points at YRI and 0,7 percentage points in the U.S.
- Worldwide operating profit declined nine percent, prior to foreign currency translation, including declines of 14 percent in China and two percent at YRI. Operating profit grew one percent in the U.S.
- Worldwide effective tax rate, prior to Special Items, increased to 33,1 percent from 25,1 percent driven primarily by a tax reserve adjustment. The tax rate increase negatively impacted EPS results by ten percentage points.
- A non-cash, Special Item net charge of 258 million USD related to the write-down of Little Sheep intangible assets was recorded in the quarter. This charge impacted reported EPS by 55 percentage points.
- On September 19, 2013, the Company announced a ten percent increase in its quarterly dividend, marking the ninth consecutive year the dividend increased at a double-digit percentage rate.
China Sales Update
September same-store sales, which will be included in China Division´s fourth-quarter results, declined an estimated eleven percent for the China Division. This included estimated growth of six percent at Pizza Hut Casual Dining and an estimated decline of 13 percent at KFC, where sales have not yet fully recovered from the adverse publicity surrounding the December poultry supply incident.
Revised Full-Year Outlook
Based on KFC China sales for September, it is now unlikely China Division same-store sales will be positive for the fourth quarter. Given lower-than-expected China sales and a higher-than-expected full-year tax rate, the Company now estimates a high-single to low-double-digit full-year EPS decline versus prior year, excluding Special Items. This compares to our previous guidance of a mid-single-digit decline in EPS.
Chairman´s Commentary
David C. Novak, Chairman and CEO, said, «Despite the disappointing third-quarter performance, I remain as confident as ever in our ability to deliver strong, sustainable growth in the years to come. Given a slower-than-expected sales recovery at KFC China and a higher-than-expected tax rate, we are now estimating a high-single to low-double-digit percentage decline in full-year EPS versus prior year, excluding Special Items. Our revised full-year EPS outlook is obviously well below our eleven-year track record of double-digit growth through 2012. We also recorded a significant non-cash Special Item charge for the write-down of Little Sheep intangible assets. Little Sheep remains the number-one brand in China´s largest casual dining category, and we remain committed to this concept as an engine of future growth».
«Even with our recent challenges, KFC is unquestionably the category leader in China and we remain confident sales will fully recover from the adverse publicity surrounding the December poultry supply incident. Our Pizza Hut business in China continues to deliver strong results, and the rest of Yum! is performing generally as expected for the full year. I am pleased with the strong margin performance in China in the face of significant sales deleverage, along with the fact that Taco Bell has produced seven consecutive quarters of positive same-store sales growth. We remain on the ground floor of global growth and continue to have unparalleled development opportunities. As evidence of this, we expect to open at least 700 new units in China this year, as we capitalize on the world´s fastest growing consuming class. Outside of China, we expect record new-unit openings for Yum! Restaurants International and in India this year. When you add it all up for Yum!, we will open at least 1’850 new restaurants outside the U.S., further strengthening our leadership position in emerging markets. In addition, we will have net new-unit growth in the U.S. for the second consecutive year».
«We expect to deliver at least 20 percent EPS growth in 2014 and restore our track record of double-digit EPS growth in the years ahead. Our business model remains compelling and we will continue to invest behind the enormous growth opportunities we see around the world».
