Yum! Brands: Reports Third-Quarter EPS Growth of 14%

Louisville / KY. (yb) Yum! Brands Inc. reported results for the third quarter ended September 05, 2015, including EPS of 1.00 USD, excluding Special Items. Reported EPS was 0.95 USD. Q3/2015 Summary:

  • Worldwide system sales grew six percent. Worldwide restaurant margin increased 3.3 percentage points to 18.2 percent, and worldwide operating profit increased 23 percent.
  • Total international development was 376 new restaurants; 72 percent of this development occurred in emerging markets.
  • China Division system sales increased eight percent, driven by seven percent unit growth and two percent same-store sales growth. Restaurant margin increased 4.7 percentage points to 19.6 percent. Operating profit increased 64 percent.
  • KFC Division system sales increased six percent, driven by three percent unit growth and three percent same-store sales growth. Operating margin decreased 0.2 percentage points to 21.7 percent. Operating profit increased three percent.
  • Pizza Hut Division system sales increased two percent, driven by two percent unit growth and one percent same-store sales growth. Operating margin decreased 0.7 percentage points to 25.4 percent. Operating profit was even.
  • Taco Bell Division system sales increased seven percent, driven by three percent unit growth and four percent same-store sales growth. Operating margin decreased 0.1 percentage points to 28.0 percent. Operating profit increased six percent.
  • India Division system sales decreased nine percent, as ten percent unit growth was offset by an 18 percent same-store sales decline.
  • Worldwide effective tax rate increased to 24.8 percent from 22.4 percent.
  • Foreign currency translation negatively impacted operating profit by 29 million USD.

Chief Executive’s Commentary

Greg Creed, CEO, said «Third-quarter EPS grew 14 percent. We are pleased same-store sales turned positive and we achieved restaurant margins of nearly 20 percent in our China business. However, the pace of recovery in our China Division is below our expectations. Outside of China, our Taco Bell and KFC Divisions continued to sustain their positive sales momentum while Pizza Hut was relatively flat. Given our lower full-year expectations in China, combined with additional foreign exchange impact, we now expect 2015 EPS growth to be well below our target of at least ten percent».

«Our growth fundamentals in China, including new-unit development, remain intact. However, we are experiencing unexpected headwinds, making the second half of the year more challenging than we anticipated. Our new China Division CEO, Micky Pant, and his leadership team are taking significant actions to get sales, traffic and profits back to historic levels. Outside of China, KFC continued its solid growth across both emerging and developed markets. Taco Bell’s same-store sales growth was boosted by insight-driven innovation coupled with industry-leading value. We remain confident in the actions underway at Pizza Hut to turn this business around longer term».

«Our central goal remains building three iconic, global brands people trust and champion. We are focused on the three keys to driving shareholder value: new-unit development, same-store sales growth, and high returns on invested capital. I am confident that this formula will produce strong, sustainable EPS growth over the long term. As evidence of this, we are pleased to announce a twelve percent increase to our quarterly dividend, which marks the eleventh consecutive year we have raised our dividend at a double-digit percentage rate» (Image: Ollie Harridge).