With a leg up in China, Yum Brands posts tasty forecast
KFC catches on in communist country, plumping up sales
With Chinese diners giving a greasy thumbs up to KFC, the parent of the fried-chicken chain — which also owns Taco Bell and Pizza Hut — reported a nice earnings boost in its second quarter and raised its profit forecast for the fiscal year.
Yum Brands reported that it earned $339 million in the quarter ended June 11, up 44% from $235 million a year ago.
Earnings per share adjusted for certain items came to 75 cents a share, ahead of analyst expectations for earnings of 74 cents a share, according to S&P Global Market Intelligence.
Yum shares got a 4.5% boost in after-hours trading on the report.
Yum CEO Greg Creed said he expects the company’s core operating profit to jump 14% this year, up from a previously expected 12% gain.
He was particularly proud of KFC’s gains in China, which beat the company’s expectations with 3% same-store growth.
Yum has benefited in recent months from its expansion in China, where it opened 72 restaurants in the quarter, bringing its total to more than 7,200. Yum is in the process of splitting off its China division as a separate company, which is expected to be complete at the end of October.
Still, overall sales fell. Creed noted weaker spending in the U.S. due to “challenging industry conditions.”
Yum Brands, based in Louisville, said sales came to $3.01 billion for the quarter, down 3% from $3.1 billion in the same quarter last year.
Analysts estimated sales of $3.09 billion. Sales at restaurants open at least a year within the KFC division rose 2% but were flat for Pizza Hut and down 1% for Taco Bell.
The company has been particularly focused in the U.S. on making its Taco Bell chain more of a dining destination, with new store designs currently being tested and opening a handful of what it calls “cantina” restaurants in major cities such as Chicago and, soon, Las Vegas. These flagship locations have a tapas-style menu and sell alcohol.
The company has been trying to keep customers chomping on chicken, too, with new menu items at KFC such as Nashville Hot Chicken and a rotating cast of comedic actors playing the iconic KFC colonel in the brand’s commercials.