LOUISVILLE KY. Taco Bell that flattened out blended U.S. results including KFC and Pizza Hut, Yum! Brands Inc. has outlined long-term strategies to boost its flagging domestic business. —After reporting a slide in second-quarter same-store sales for
Though the company was the subject of speculation this month that it might consider acquiring Wendy’s, Yum’s plans for its current chains’ renewed multibranding and daypart extensions remained of greatest concern to their U.S. franchisees. —After reporting a slide in second-quarter same-store sales for
The domestic turnaround strategy took some attention away from Yum’s strong quarterly results in China and elsewhere internationally. Yum’s overseas business helped the company post an 11.5-percent year-to-year jump in profit to $214 million on an 8-percent increase in corporate revenue to $2.37 billion for the three months ended June 16. —After reporting a slide in second-quarter same-store sales for
“We are confident we will right the ship and our 2008 will be strong,” chairman and chief executive David Novak told analysts following Yum’s release of quarterly results. —After reporting a slide in second-quarter same-store sales for
“Time is our biggest ally,” Novak said, referring to a hoped-for business recovery for Taco Bell, whose Yum-owned branches suffered a 7-percent dip in same-store sales for the period as the company’s own KFC and Pizza Hut outlets saw their same-store sales fall 3 percent, leaving systemwide U.S. results for the chains flat from a year earlier. —After reporting a slide in second-quarter same-store sales for
Novak said Taco Bell, which took a sales dive after an E. coli outbreak late last year was linked to Northeastern branches of the chain and a rat infestation at a New York City outlet garnered notoriety, is recovering more slowly than anticipated. —After reporting a slide in second-quarter same-store sales for
“We just have to weather this period and get our marketing plans in line,” he said. —After reporting a slide in second-quarter same-store sales for
Rick Carucci, Yum’s chief financial officer, and Novak cited the company’s strong quarterly results in China and its non-China international division. Same-store sales in mainland China, where Yum’s KFC and Pizza Hut operations are dominant players, increased 7 percent as total sales there leaped 25 percent on a 19-percent increase in outlets. Yum’s non-China international division posted a 5-percent gain in same-store sales and a 15-percent total sales increase. Worldwide for the quarter, same-store sales increased 2 percent on average. —After reporting a slide in second-quarter same-store sales for
Citing strengths in China and elsewhere abroad, Yum increased its full-year projection for annual growth in earnings per share by 1 point to 12 percent, which would yield $1.63 per share for 2007. —After reporting a slide in second-quarter same-store sales for
Second-quarter earnings per share were 39 cents, up 15 percent from a year earlier. —After reporting a slide in second-quarter same-store sales for
Responding to queries during a conference call with stock analysts, Novak and Carucci discussed initiatives that they expect will lead to improved domestic sales at Yum’s three major brands. —After reporting a slide in second-quarter same-store sales for
“Taco Bell is our biggest challenge,” Novak said. “We have work to do.” —After reporting a slide in second-quarter same-store sales for
New products will be introduced in the second half of the year to boost sales, he said, noting that customer response has been enthusiastic to its latest product launch: Chicken Grilled Taquitos. —After reporting a slide in second-quarter same-store sales for
Responding to an analyst’s question about the expansion of Taco Bell’s test of breakfast in several markets, Novak said that daypart was the hardest to crack because of entrenched consumer behavior—presumably a reference to McDonald’s domination of the quick-service breakfast market. Novak said breakfast eventually would become a national rollout for Taco Bell but not in 2008. —After reporting a slide in second-quarter same-store sales for
Pizza Hut and its approximately 1,000 WingStreet co-brand conversions drew particular praise from Novak, who said the goal was to add the chicken wing component to Pizza Hut “on a national basis.” —After reporting a slide in second-quarter same-store sales for
Although Yum would not break out same-store sales for Pizza Hut or KFC, Novak credited his optimism about the pizza brand to carryout and delivery sales by WingStreet, a relaunch of the calzone-like P’zone, and new online-ordering capabilities. But he also acknowledged the strengths of rivals Domino’s and Papa John’s. —After reporting a slide in second-quarter same-store sales for
“We are in a tugfest with two very strong national competitors,” he said, “but we think we can get on a 2- to 3-percent positive same-store sales track and better.” —After reporting a slide in second-quarter same-store sales for
Novak and Carucci both expressed concerns about rising cheese, beef and wheat costs, saying they expect dairy product cost inflation of 3 percent this year.The company’s chicken supplies are locked in through the end of this year, but the two executives blamed rising minimum wages in many states in the past 12 months for increasing Yum’s labor costs. —After reporting a slide in second-quarter same-store sales for
Novak hailed several KFC initiatives as successes, including its rollout of a trans-fat-free frying oil blend, multibranding of KFC with Taco Bell, extended late-night hours in several markets and the updating of older KFC units. —After reporting a slide in second-quarter same-store sales for
“Remodeling of KFC has a mid-2008 deadline and is 70 percent done and on schedule,” Novak said. —After reporting a slide in second-quarter same-store sales for
Still, he expects the process to result in a “modest” number of closures—roughly 200 of the total 5,000 U.S. units—and some consolidation of franchisees who would buy out others not willing to upgrade their stores. —After reporting a slide in second-quarter same-store sales for
“In the U.S., we are making steady progress toward a full recovery with improving sales results across our brands in the second quarter,” Novak said. “Overall for the U.S., we expect full-year operating profit growth to be slightly positive.” —After reporting a slide in second-quarter same-store sales for
Yum’s global growth will continue into a seventh straight year in which at least 1,000 new restaurants were launched abroad, including 400 in China alone in 2007, Novak said. Other regions showing healthy growth in systemwide sales are the Middle East, up 32 percent; South Africa, up 28 percent; the Caribbean, up 13 percent; and Asia, up 12 percent. —After reporting a slide in second-quarter same-store sales for
Novak also cited growing opportunities in developing countries, such as Vietnam, which now has 32 KFCs and two Pizza Huts. —After reporting a slide in second-quarter same-store sales for
Yum said it expects to buy back more than $1 billion of its stock this year, which would cut the number of outstanding shares by at least 3 percent. A “meaningful” shareholder dividend also is planned for the year. —After reporting a slide in second-quarter same-store sales for
Analyst David Palmer of UBS in New York said in a research note that he expects domestic same-store sales to turn positive by the fourth quarter, and he raised his rating to “buy” from “neutral.” —After reporting a slide in second-quarter same-store sales for
Jeffrey Bernstein, an analyst at Lehman Brothers Holdings in New York, said in a note that “Yum! Brands has the greatest long-term international potential growth in the fast-food industry.” —After reporting a slide in second-quarter same-store sales for