Net income at Yum! Brands Inc. fell 30 percent in the second quarter ended June 13, the company said on Tuesday, as the chain's weakness in China continued to offset strength elsewhere in the world.
The company said that net income in the period was $235 million, or 54 cents per share, down from $334 million, or 75 cents, in the same period a year before. Excluding special items, the company said that EPS fell 5 percent in the period.
But Yum CEO Greg Creed said that China sales are expected to recover in the second half of the year as the Louisville, Ky.-based company continues to distance itself from health scares in China.
“We expect substantial same-store sales and profit growth in the second half given overall trends in sales and brand perceptions,” Creed said in a statement, noting that the company is still on track to open 700 new restaurants in the country this year.
Total revenues at the company were $3.1 billion in the quarter, down 3 percent from the same period a year ago, or $3.2 billion.
Yum! Brands has nearly 42,000 locations worldwide and is on pace to open a record 2,100 international units this year, Creed said.
Same-store sales at Taco Bell rose 6 percent in the quarter, the company said. Total system sales in the period increased 9 percent, which also includes 3 percent new unit growth. The brand opened 58 new restaurants in the quarter.
KFC same-store sales rose 3 percent, including 3 percent in the U.S., as the brand continues its domestic comeback. Total system sales in the period were up 6 percent, excluding foreign currency translation.
Pizza Hut same-store sales were flat, though comparable store sales rose 1 percent in the U.S. Total system sales at the pizza concept rose 1 percent excluding foreign currency translation.
“Outside of China, Taco Bell is firing on all cylinders, driven by industry-leading innovation and a solid breakfast platform,” Creed said. “KFC continues to produce consistently positive results in both emerging and developed markets, including our U.S. business.
“At Pizza Hut, results continue to be soft, but we are taking clear steps to get the business back on track.”
Yum’s stock price has been on a tear this year, up 25 percent, amid a belief that China sales will improve. In addition, there’s speculation that the company could spin off that business — which accounted for nearly 40 percent of Yum’s total operating profit, even as operating profit there fell 26 percent to $144 million in the second quarter.
Activist investors, including Corvex Management, have taken big positions in Yum and have predicted that Yum will spin off the China business into its own company.
This story has been revised to reflect the following correction:
Correction: June 14, 2015 A previous version had the wrong amounts for systemwide sales growth for KFC and for Pizza Hut.
Contact Jonathan Maze at [email protected]
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