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Yum! Brands Has Appetizing Quarter

The company raises its full-year outlook after seeing strong U.S. results and a China rebound.
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Yum! Brands


posted an 11% rise in first-quarter profits, aided by strong results in the U.S. and a rebound from bird-flu fears in China. The owner of the KFC, Pizza Hut and Taco Bell chains also raised its guidance for the full year.

Yum! reported earnings of $170 million, or 59 cents a share, up from $153 million, or 50 cents a share, a year earlier. Analysts polled by Thomson First Call had forecast earnings of 57 cents a share.

The Louisville, Ky.-based company posted revenue of $2.09 billion, in line with Wall Street's target and up from $2.05 billion a year ago.

In the U.S., Yum! had 5% blended same-store sales growth, though company sales fell 1% due to the refranchising of 308 company-owned restaurants over the past year. Yum! said its overall U.S. operating margins improved because of lower commodity costs.

In the China division, company sales rose 18% to $269 million as KFC sales in mainland China recovered from bird-flu fears that peaked in the fourth quater. Restaurant margins declined 1.3 percentage points due to higher labor costs and a drop in same-store sales.

"We are pleased with the sales recovery of our mainland China business, reporting system-sales growth of 35% in local currency for March," said Chairman and CEO David Novak in a press release. "This, in combination with our strong core profit growth in the first quarter and a much better U.S. commodity outlook, gives us confidence we will have another good year."

Yum! now sees full-year earnings of at least $2.81 a share, up from its prior forecast of $2.79. Analysts, on average, anticipate earnings of $2.81 a share for 2006.

Yum! shares recently rose 60 cents, or 1.2%, to $50.20 in after-hours trading.