LOUISVILLE Ky. Strong international results for Yum! Brands Inc. trumped the effects of a widely publicized rat infestation and E. coli outbreak within its Taco Bell brand, helping the company post a 14-percent year-over-year increase in first-quarter profit on a total revenue gain of 7 percent.
The gains came despite an 11-percent decline in same-store sales at Taco Bell, a result of the "two incidents" at the chain that resulted in "adverse publicity," Yum said in a statement. Last December, Taco Bell units in the Northeast were subject to an E. Coli outbreak from tainted lettuce. In February, a New York-based Taco Bell-KFC combination unit was infested with rats, a video of which was widely distributed online and on television.
Yum, which is also parent to the KFC, Pizza Hut, A&W and Long John Silver's chains, reported net income of $194 million, or 70 cents per share, for the quarter ended March 24. In the same period a year earlier, the company posted earnings of $170 million, or 59 cents per share. Revenues for the latest quarter totaled $2.22 billion, up from $2.09 billion a year ago.
The stronger-than-expected results led the company to increase by 2 cents its full-year, per-share earnings expectations to $3.23, up 11 percent from its per-share earnings in fiscal 2006.
For the first quarter, U.S. operating profit decreased 11 percent versus last year, mainly because of a 6-percent decline in U.S. blended same-store sales at corporate restaurants, the company said. Yum’s blended same-store sales include results from units within the company’s KFC, Taco Bell and Pizza Hut concepts.
Yum said it expects "to be back on track for improved U.S. performance during the second half of 2007."
The company no longer reports first-quarter same-store sales results for its other brands.
Overseas, Yum reported a 24-percent systemwide sales growth for its China division, which includes Thailand and KFC Taiwan in addition to all restaurants in mainland China. The sales were driven by same-store-sales growth of 9 percent in mainland China, the company said. Operating profit rose 31 percent.
In Yum’s other international markets, first-quarter systemwide sales increased 13 percent from a year ago, aided by a 7-percent same-store sales gain, and operating profit jumped 25 percent, the company reported.
