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Yum says 4Q comps will fall

LOUISVILLE Ky. Yum! Brands Inc., operator and franchisor of KFC, Pizza Hut, Taco Bell, Long John Silver’s and A&W, said same-store sales for its final quarter this year will be negative across the board, especially with continued weakness in the United States.

In an update Friday, Louisville-based Yum said same-store sales for the December-ending quarter are expected to decline 3 percent in mainland China, typically the company’s strongest region, and fall 1 percent in other international markets. Same-store sales are expected to drop 8 percent in the U.S.

“Our biggest challenge continues to be driving same-store sales growth in the difficult consumer environment,” chief executive David Novak said in a statement. “All indications are that 2010 will be another challenging year …”

Despite projecting continued sales weakness, the company reaffirmed its 2009 earnings per share guidance, which it said will increase by 12 percent from 2008, excluding special items.

Unit expansion in Yum’s international markets, which has carried the quick-service conglomerate the past few years as sales have softened in its domestic market, contributed to the company meeting its target, officials said. Favorable commodity costs, a lower tax rate and productivity gains also helped results, Yum said.

More than 1,400 new restaurants in the Yum Restaurants International division, and the China division drove earnings growth.

In 2010, Yum said it expects to grow earnings per share by at least 10 percent, mostly on the strength of its international restaurants, especially in mainland China. Should Yum succeed in hitting that earnings mark, it would be the ninth straight year of reaching or exceeding growth targets.

Yum plans to build another 1,400 units in China and the international division combined.

The company is targeting profit growth, excluding foreign-currency translation, of 15 percent in China — which includes results from Thailand and KFC Taiwan — 10 percent in its international division, and 5 percent in the United States. Yum officials expect a 2010 foreign-currency translation benefit of between $25 million and $50 million.

Yum operates or franchises more than 36,000 restaurants in 110 countries.

Contact Mark Brandau at [email protected].

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