LOUISVILLE Ky. Yum! Brands Inc. reported a 10-percent increase in first-quarter net income, led by robust profit and sales in its China division, as well as a return to positive same-store sales at its domestic Pizza Hut restaurants, which helped lift struggling U.S. sales.
Yum narrowed its same-store sales decline for its U.S. system to a 1-percent decrease in the first quarter ended March 20, reflecting a 4-percent slide at KFC and a 2-percent fall at Taco Bell, offset by a 5-percent jump at Pizza Hut. The nation’s largest pizza chain had struggled to improve its sales for some time, but gained traction with its $10 any-size pizza deal promoted aggressively in the first quarter, including during the Super Bowl pregame show.
“In the U.S., we are also pleased we have seen significant sales improvement since the fourth quarter, particularly at Pizza Hut,” Novak said. “While we are encouraged by this improvement, we are not yet performing to expectations as profits were down 9 percent and same-store sales declined 1 percent.”
Net income for the multiconcept operator and franchisor totaled $241 million, or 50 cents per share, for the quarter ended March 20, compared with earnings of $218 million, or 46 cents per share, in the same quarter a year earlier.
Latest-quarter total revenue rose 5.8 percent to $2.35 billion, reflecting double-digit gains in system sales for its China division and Yum Restaurants International group, which overcame an 11-percent decrease in U.S. system sales. Yum’s U.S. revenues were hurt by the company’s ongoing refranchising program.
“Although the global operating environment remains challenging, we are confident we are well on our way to another year of achieving our target of at least 10-percent [earnings per share] growth,” said David Novak, Yum’s chairman and chief executive. “Longer term, our shareholders should expect us to continue to build stronger brand positions around the world, leverage our unique ability to deliver international new-unit development, maintain our industry-leading return on invested capital, and return cash through dividends and share repurchases.”
Results for the China division, which includes only restaurants in mainland China, included a 4-percent increase in same-store sales and the opening of 96 new locations. Operating profit grew 37 percent in China in the first quarter.
Yum’s international division, which includes Thailand and KFC Taiwan, had a 2-percent decline in same-store sales, including a negative impact of 1 percent from the timing of Chinese New Year and a tough comparison with the prior first quarter, the company said. Yum Restaurants International opened 109 new locations in the quarter, most of them franchised.
Contact Mark Brandau at [email protected].