Yum! Brands Reports Second-Quarter EPS Growth Of 1%, Or $0.67 Per Share, Excluding Special Items; Projects Record International New-Unit Development For The Year; Reconfirms Full-Year 2012 EPS Growth Forecast Of At Least 12%
Yum! China, our largest profit-contributing division, reported strong system sales growth of 27%, prior to foreign currency translation. However, operating profit declined 4%, prior to foreign currency translation, as high inflation drove restaurant margins down 4 percentage points versus last year. We expect this to be short-lived, returning to double-digit profit growth in the second half of the year. Our outstanding China team now expects to open a record of at least 700 new units this year.
System sales grew 7% at YRI and operating profit grew 6%, both prior to foreign currency translation. Same-store sales in YRI’s emerging markets grew 9%, driving overall same-store sales growth of 4% at YRI. System sales grew 32% in our India division. Our YRI and India divisions combined will also set a new-unit development record this year with over 1,000 new restaurants. Over 65% of these new units are expected to open in high-growth emerging markets.
Most importantly, I’m confident we’re making our brands even more vibrant around the world. Our long-term growth prospects have never been brighter as we continue to deliver consistently strong annual results. We expect this year to be our eleventh consecutive year of double-digit EPS growth, prior to special items.”
|Second Quarter 1||Year-to-Date|
|% Change||% Change|
|2012||2011||Reported||Ex F/X||2012||2011||Reported||Ex F/X|
|System Sales Growth||+31||+27||+32||+28|
|Same-Store Sales Growth (%)||+10||+18||NM||NM||+12||+16||NM||NM|
|Restaurant Margin (%)||15.6||19.7||(4.1||)||(4.1||)||19.1||22.0||(2.9||)||(3.0||)|
|Operating Profit ($MM)||182||182||—||(4||)||438||397||+10||+6|
|1 The second quarter of 2012 is the first quarter to include the consolidated operating results of Little Sheep.|
China Division system sales increased 27%, prior to foreign
currency translation. Same-store sales increased 10%, overlapping
prior year same-store sales growth of 18%.
- Same-store sales growth was driven by a 6% increase in same-store transactions.
- Same-store sales growth was 9% at KFC and 10% at Pizza Hut Casual Dining, overlapping prior year same-store sales growth of 17% and 22%, respectively.
- China opened 160 new units and now projects record new-unit development of at least 700 units this year.
|China Units||Q2 2012||% Change 2|
|Traditional Restaurants 1||4,785||+18|
|Pizza Hut Casual Dining||696||+28|
|1 Total includes Pizza Hut Home Service and East Dawning; excludes Little Sheep units|
|2 Annual Rate of Change excludes Little Sheep units for comparability of core business|
- Restaurant margin decreased 4.1 percentage points to 15.6%, driven primarily by wage rate inflation of 13% and commodity inflation of 6%, and higher start-up costs from an increased pace of development.
- Foreign currency translation positively impacted operating profit by $6 million.
- The Little Sheep acquisition had a positive impact of 4 percentage points on system sales growth, a negative impact of 0.3 percentage points on restaurant margin, and no impact on operating profit.
|YUM! RESTAURANTS INTERNATIONAL (YRI) DIVISION|
|Second Quarter 3||Year-to-Date 3|
|% Change||% Change|
|2012||2011||Reported||Ex F/X||2012||2011||Reported||Ex F/X|
|Traditional Restaurants 1||14,105||13,675||+3||NA||14,105||13,675||+3||NA|
|System Sales Growth||+4||+7||+5||+7|
|Restaurant Margin (%)||11.8||12.9||(1.1||)||(1.1||)||12.0||12.9||(0.9||)||(0.9||)|
|Franchise & License Fees ($MM)||193||186||+4||+7||392||372||+5||+8|
|Operating Profit ($MM) 2||150||146||+3||+6||318||304||+5||+7|
|Operating Margin (%)||19.5||19.9||(0.4||)||(0.3||)||21.5||21.9||(0.4||)||(0.3||)|
|1 During the fourth quarter of 2011, we sold the LJS and A&W brands. As a result, 341 LJS and A&W restaurants have been removed from the 2011 unit balance. LJS and A&W results remain in all other 2011 financial numbers.|
|2 The 2011 divestiture of LJS and A&W had a negligible impact on operating profit.|
|3 Results for all periods exclude the India Division. India is now a standalone segment and reported separately.|
YRI Division system sales increased 7%, prior to foreign
- Emerging markets system sales grew 13%, driven by 9% same-store sales growth and 7% unit growth.
- Developed markets system sales grew 2%, driven by 1% same-store sales growth.
YRI opened 172 new units in 45 countries.
- For the quarter, 108 new units were opened in emerging markets.
- Our franchise partners opened 91% of all new units.
- Restaurant margin decreased 1.1 percentage points driven by increased costs in Thailand and a same-store sales decline in KFC France. While same-store sales declined in KFC France, system sales grew 6% due to unit growth.
- Foreign currency negatively impacted operating profit by $5 million.
|YRI MARKETS 1||SYSTEM Sales Growth (Ex F/X)|
|Percent of YRI 2||Second Quarter (%)||Year-to-Date (%)|
|Asia (ex Japan) 3||16||%||+3||+6|
|Combined Company / Franchise|
|Australia / New Zealand||12||%||(2||)||(1||)|
|Germany / Netherlands||2||%||+14||+14|
|1 See website www.yum.com under tab "Investors" for a list of the countries within each of the YRI markets.|
|2 Percentage of Total YRI System Sales for Full Year 2011.|
|3 The timing of Chinese New Year negatively impacted Asia system sales growth by approximately 2 percentage points in the second quarter while benefiting the first quarter by approximately 2 percentage points.|
|2012||2011||% Change||2012||2011||% Change|
|Same-Store Sales Growth (%)||+7||(4||)||NM||+6||(2||)||NM|
|Restaurant Margin (%)||17.5||11.7||5.8||16.0||11.2||4.8|
|Franchise and License Fees ($MM)||188||180||+4||366||352||+4|
|Operating Profit ($MM)||166||132||+26||324||255||+27|
|Operating Margin (%)||20.4||15.0||5.4||20.1||14.8||5.3|
- U.S. Division same-store sales increased 7%, including growth of 13% at Taco Bell, 4% at Pizza Hut and 1% at KFC.
- Restaurant margin increased 5.8 percentage points, driven primarily by strong sales leverage.
- The 2011 divestiture of LJS and A&W negatively impacted revenue growth by 1 percentage point, franchise and license fees by 6 percentage points, and operating profit by 1 percentage point.
YUM! RESTAURANTS INDIA DIVISION
- India Division system sales increased 32%, prior to foreign currency translation. The system sales increase was driven by unit growth of 29% and same-store sales growth of 7%.
|India Units||Q2 2012||% Change 1|
|Traditional Restaurants 2||479||+29|
|Pizza Hut Casual Dining||168||+8|
|Pizza Hut Home Service||96||+68|
|1 Annual rate of change|
|2 Total includes 3 Taco Bell units|
- In the U.S., we refranchised 38 units for proceeds of $21 million, primarily related to Taco Bell. We recorded pre-tax gains of $9 million related to these transactions in Special Items. Currently, our company ownership is 12% in the U.S. Upon the completion of our U.S. refranchising program, total company ownership in the U.S. will be 10% or slightly less.
- In the second quarter, shares repurchased at an average price of $68 totaled $211 million for 3.1 million shares. Through the date of the release, shares repurchased totaled $438 million for 6.7 million shares at an average price of $66.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV