Louisville / KY. (yb) Yum! Brands Inc. reported results for the third quarter ended September 08, 2012 including EPS of 0,99 USD, excluding Special Items. Reported EPS for the quarter was 1,00 USD. Yum! raises full-year EPS growth forecast to at least 13 percent, or at least 3,24 USD, excluding Special Items. Highlights:
- Worldwide operating profit grew 18 percent, prior to foreign currency translation, including 22 percent in China, 14 percent at Yum! Restaurants International (YRI) and 13 percent in the U.S. Worldwide operating profit increased 16 percent, after foreign currency translation.
- Worldwide restaurant margin increased 1,9 percentage points to 18,9 percent, including increases of 0,1 percentage points in China, 1,0 percentage point at YRI and 4,6 percentage points in the U.S. Restaurant margin increased 0,6 percentage points in China excluding Little Sheep.
- Worldwide system sales grew six percent, prior to foreign currency translation, including 22 percent in China, four percent at YRI and one percent in the U.S.
- Worldwide system sales growth was eight percent, excluding the acquisition of Little Sheep and the 2011 divestiture of Long John Silver´s and A+W All-American Restaurants, including 19 percent in China, five percent at YRI and six percent in the U.S.
- Same-store sales grew six percent in China, two percent at YRI and six percent in the U.S. YRI same-store sales were negatively impacted by one percentage point due to the timing of Ramadan.
- Strong international development continued with 394 new restaurants opened, including 192 new units in China and 181 new units at YRI; 86 percent of this development occurred in emerging markets.
- On September 20, 2012, the Company announced an 18 percent increase in its quarterly dividend, marking the eighth consecutive year the dividend increased at a double-digit percentage rate.
Full-year EPS growth forecast raised to at least 13 percent
David C. Novak, Chairman and CEO: «Very strong sales and profit at all of our divisions, including China, Yum! Restaurants International, India and the U.S., drove 19 percent third-quarter EPS growth. Given the strength of our year-to-date results, I am pleased to report we are raising our full-year EPS growth forecast to at least 13 percent, excluding Special Items».
«In China, our category-leading brands and competitive positions are stronger than ever. China system sales grew 22 percent as we opened 192 new restaurants and delivered same-store sales growth of six percent; operating profit grew 22 percent, prior to foreign currency translation. Importantly, China restaurant margin performance improved dramatically from the second quarter, once again demonstrating the ongoing strength of our business model. This strong performance, combined with our new expectation to open over 750 high-return new restaurants this year, further demonstrates why we are so confident in the long-term growth of our China business. Yum! Restaurants International (YRI) reported its best quarterly operating profit performance of the year with growth of 14 percent, prior to foreign currency translation. YRI, combined with Yum! Restaurants India, will have a record year of new unit development. When you add it all up for Yum!, we will open at least 1’750 new restaurants outside the U.S., further strengthening our leadership position in emerging markets. At the same time, our heightened operations focus and product innovation has driven much better performance in the U.S., with all three brands growing sales, margin and profit».
«We expect 2012 to be our eleventh consecutive year of delivering at least 13 percent EPS growth, prior to Special Items. Our consistent track record is evidence that Yum! Brands is capable of delivering strong double-digit growth even in the most challenging economic times. We expect this to continue as we build on our track record of at least ten percent EPS growth in 2013 and well into the future».
China Division
China Division system sales increased 22 percent, prior to foreign currency translation. Same-store sales increased six percent, overlapping strong prior year same-store sales growth of 19 percent. China opened 192 new units and Yum! expects record new-unit development of at least 750 units this year. Restaurant margin increased 0,1 percentage points to 21,4 percent. Wage rate inflation was eight percent and commodity inflation was two percent. The Little Sheep acquisition had a positive impact of three percentage points on system sales growth, a negative impact of 0,5 percentage points on restaurant margin, and a negative impact of one percentage point on operating profit growth. Foreign currency translation positively impacted operating profit by five million USD.
International Division (YRI)
YRI Division system sales increased four percent, prior to foreign currency translation. The timing of Ramadan had an estimated negative system sales impact of about one percent; the most sizable impact was in the Middle East franchise business which experienced a negative impact of seven percent. The 2011 divestiture of LJS and A+W had a negative impact of one percent on both system sales and operating profit growth. Emerging markets system sales grew ten percent, driven by seven percent unit growth and five percent same-store sales growth. Developed markets system sales grew one percent. YRI opened 181 new units in 46 countries; 93 percent were opened by our franchise partners. For the quarter, 124 new units were opened in emerging markets. Foreign currency translation negatively impacted operating profit by twelve million USD.
US Division
U.S. Division same-store sales increased six percent, including growth of seven percent at Taco Bell, six percent at Pizza Hut and four percent at KFC. Restaurant margin increased 4,6 percentage points, driven primarily by strong same-store sales growth, as well as re-franchising, supply chain efficiencies, and less discounting. The 2011 divestiture of LJS and A+W negatively impacted franchise and license fees growth by five percentage points and operating profit growth by two percentage points.
Yum! Restaurants India Division
India Division system sales increased 29 percent, prior to foreign currency translation. The system sales increase was driven by unit growth of 29 percent and same-store sales growth of five percent.
Ownership / Special Items Update
In the third quarter, Yum! repurchased 6,5 million shares for 414 million USD at an average price of 64 USD. Year-to-date, Yum! repurchased 10,8 million shares for 702 million USD at an average price of 65 USD. In an effort to reduce ongoing volatility and administration expense in connection with the Company´s U.S. pension obligation, on October 09, 2012, the Company began notifying certain former employees of a limited opportunity to voluntarily elect an early payout of their pension benefits to be funded from existing pension assets. As a result of this program, Yum! anticipates recording a pre-tax non-cash charge between 25 million USD and 75 million USD in the fourth quarter of 2012 within Special Items. The amount of this charge will depend on the actual number of participants electing the lump sum payment option.
