Yum! Brands Conference Call Highlights

Yum! Brands YUM reported its Q3 earnings on Wednesday. Shares of the company are up 1%. Below are some key highlights and takeaways from its conference call: Operations and Growth: • Despite the recent supplier incident in China which has impacted China sales and reduced our full-year EPS outlook. • I'm absolutely confident in Yum! Brands ability to deliver strong sustainable growth in the years ahead. • We fully expect China to fully recover. KFC global is having a strong year and building momentum. • Taco Bell has successfully and profitably introduced breakfast and is now expanding in the United States with new unit growth. • Pizza Hut global should have a strong 2015 led by an expected U.S. turnaround which is in its early stages. • For the third quarter, earnings per share increased 3% excluding special items. • We clearly had unexpected negative sales in China and continued soft performance at our Pizza Hut Division. • We delivered solid results at our KFC and Taco Bell divisions and had the benefit of overlapping a higher tax rate in the prior year. • Importantly, our China sales are on the path to recovery and we expect a strong back bounce back in 2015. • First half EPS growth of 27% was driven by particularly strong results in China where system sales grew 19% and we delivered restaurant margins of nearly 20%. • As a result, we're now estimating full-year EPS growth of 6% to 10% prior to special items. • Today, we have nearly 1,200 restaurants in over 300 cities in China for Pizza Hut. • Looking at Pizza Hut Casual Dining, our average unit volumes have dipped slightly below $1.6 billion, and we have restaurant margins of about 19%. • KFC, we have restaurant margins of about 15% on depressed average unit volumes of 1.4 million. • Depressed average unit volumes of 1.4 million. China: • On July 20, an undercover investigation was televised in China depicting alleged illegal actions by employees of Chinese foodservice supplier. • However, given our size and category leading positions in China, our sales were disproportionately impacted because we were mentioned with the same media weight as our major competitor. • We also began taking unprecedented measures to further strengthen our supply chain practices in China to prevent and identify fraudulent and deceptive behavior by suppliers going forward. • We're now requiring standards for suppliers in China to install closed-circuit televisions and implementation is underway. • It's extremely difficult to prevent a company from deceiving us if they resort to illegal activities. • We will learn from this incident and are committed to developing even better quality assurance processes as we move ahead. • At KFC China, we have over 4,600 restaurants in nearly 1,000 cities across the country, which is more than twice our nearest competitor. Guidance: • We firmly believe we're building momentum behind major initiatives around the world that will drive strong, sustainable growth in 2015 and beyond. • Finally, we're investing for the long term and developing great brands in India, which will drive substantial future growth for Yum!. • KFC will be bigger in units than McDonald's by the end of the year. • Pizza Hut sales and delivery unit economics are getting stronger and more competitive with Domino's. • Taco Bell, early results are encouraging with plans are accelerating the pace of development. • Now, to sum things up, in spite of our short-term issue in China, the fundamentals of Yum!'s growth model remains extremely compelling. • Furthermore, we have over 40,000 restaurants around the world that have significant capacity to grow.
Market News and Data brought to you by Benzinga APIs
Comments
Loading...
Date
ticker
name
Actual EPS
EPS Surprise
Actual Rev
Rev Surprise
Posted In: EarningsNews
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!