LOUISVILLE Ky. Despite an operating profit drop of 12 percent in the United States, Yum! Brands Inc. posted a 4-percent increase in second quarter net income as “exceptional profit growth” abroad offset continued bottom-line pressures at U.S. restaurants.
For the second quarter ended June 14, Yum earned $224 million, or 45 cents per share, compared with year-ago earnings of $214 million, or 39 cents per share. Total corporate revenues rose 12 percent to $2.65 billion, driven by the strength of overseas sales and unit development.
Yum, which operates or franchises a system of more than 35,000 restaurants under the KFC, Pizza Hut, Taco Bell, A&W and Long John Silver’s brands, said higher commodity costs in the United States led to a 2.9-percentage-point drop in restaurant margins for the quarter. The company said commodity costs increased $30 million in the second quarter compared with the same quarter last year. For the full year, the company said it expects “record commodity inflation” of more than $100 million.
Top-line progress, however, was recorded in the United States, where many restaurant chains have suffered from consumers’ slowed spending habits. Systemwide same-store stores at domestic locations rose 2 percent, up sequentially from a flat year-to-year result in the first quarter. Yum no longer provides a brand-by-brand breakout of same-store sales performances.
The company ended the quarter with 17,865 locations in the United States, down 1 percent from last year. At quarter’s end there were 2,726 units in mainland China, Thailand and Taiwan, up 20 percent from last year. There were 12,368 locations in other overseas locations, up 4 percent from last year.
International expansion has driven Yum’s consolidated earnings and sales growth as the U.S.-based restaurants continue to orchestrate a turnaround from stagnant sales. Stores in mainland China, Thailand and Taiwan posted same-store sales growth of 14 percent and operating profit growth of 38 percent. Restaurants in other international locations posted a 4-percent same-store sales increase and an 18-percent rise in operating profit.
Yum raised its full-year earnings guidance by 2 cents per share to $1.89 per share. In fiscal 2007, the company earned $1.68 per share.
