Yum! Brands Inc. Reports Second-Quarter 2008 EPS of $0.45 per share, 16% Growth Excluding Special Items; Raises Full-Year EPS Growth Forecast to 12% from 11%, Excluding Special Items
2008-07-16 15:20:00
LOUISVILLE, Ky.–(EMWNews)–Yum! Brands Inc. (NYSE: YUM) today reported results for the second
quarter ended June 14, 2008.
SECOND-QUARTER HIGHLIGHTS
-
Very strong system-sales growth of +43% in mainland China and +15% in
Yum! Restaurants International (YRI), fueled by broad-based unit
development, same-store-sales growth, and favorable foreign currency
translation.
-
Worldwide same-store-sales growth of +4%, including +14% in mainland
China, +4% in YRI, and +2% in the U.S. (all figures are system-wide).
-
Operating profit growth of +38% in China Division and +18% in YRI,
with a 12% decline in the U.S.
-
Lower effective tax rate versus prior year.
-
Increased quarterly dividend by 27% with our yield now about 2%.
-
EPS results as outlined below:
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Second Quarter |
Year-to-Date |
||||||||||||
2008 |
|
2007 |
|
% Change |
2008 |
|
2007 |
|
% Change |
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EPS Excluding Special Items |
$0.45 |
$0.39 |
+16% |
$0.87 |
$0.74 |
+17% |
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Special Items1 |
($0.00 |
) |
– |
NM |
$0.08 |
– |
NM |
||||||
EPS |
$0.45 |
$0.39 |
+15% |
$0.95 |
$0.74 |
+28% |
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1 In the second quarter, special items totaled less than a $0.01 negative impact to EPS and included $4 million of pre-tax charges related to U.S. restructuring partially offset by $1 million of pre-tax U.S. refranchising gains. |
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FULL-YEAR OUTLOOK
The Company, for the second time, raised its full-year 2008 EPS
forecast. We expect to generate $1.89 per share or 12% growth, a $0.02
increase from our previous guidance in our first-quarter earnings
release. This is prior to full-year net gains from special items of up
to $0.06 per share as previously announced in the Company’s
full-year 2007 earnings release on February 4, 2008. Full-year reported
EPS, including all items, is expected to total up to $1.95, or 16%
growth.
David C. Novak, Chairman and CEO, said, “The
power of the global Yum! portfolio is most evident even in difficult
times, and I’m pleased to report
second-quarter EPS growth of 16%, excluding special items. Based on this
strong performance, we confidently raise our full-year EPS growth
forecast to 12%. The strength of YUM’s global
development machine, which will deliver over 1,600 new units in 2008,
and the major progress we’re making on key
sales growth initiatives gives us confidence we will be able to continue
this type of consistent performance in 2009.
“Our strong second-quarter EPS growth of +16%
was driven by exceptional profit growth in our international businesses
and tax benefits recognized during the quarter. Our global system-sales
growth of 11% was led by our China and YRI businesses as well as
favorable foreign currency impact. Importantly, our international
development pace is full speed ahead, as both our China and YRI
businesses are on pace to match or exceed last year’s
record performance. As a result, our international businesses delivered
spectacular profit growth this quarter with China up 38% and YRI up 18%.
In the U.S., our profit declined primarily due to the continuation of
high commodity inflation. However, I am pleased to report our U.S.
business continues to make top line progress generating second-quarter
same-store-sales growth of +2%, the fourth consecutive quarter of
positive growth.
“Shareholders should expect us to continue
building consistent value by differentiating our portfolio of brands and
driving profitable global expansion through our four key strategies that
make us not your ordinary restaurant company: build leading brands in
China in every significant category; drive aggressive international
expansion and build strong brands everywhere; dramatically improve U.S.
brand positions, consistency and returns; and drive industry-leading,
long-term shareholder and franchisee value.”
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CHINA DIVISION |
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Second Quarter |
Year To Date |
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($ million, except restaurant counts |
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% |
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% |
||||||||||||
2008 |
|
2007 |
Reported |
|
Excl |
2008 |
|
2007 |
Reported |
|
Excl |
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Traditional Restaurants-Mainland China (MLC) |
2,726 |
2,281 |
+20 |
NA |
2,726 |
2,281 |
+20 |
NA |
||||||||
KFC |
2,264 |
1,940 |
+17 |
NA |
2,264 |
1,940 |
+17 |
NA |
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Pizza Hut Casual Dining |
384 |
289 |
+33 |
NA |
384 |
289 |
+33 |
NA |
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Pizza Hut Home Service |
61 |
41 |
+49 |
NA |
61 |
41 |
+49 |
NA |
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System-Sales Growth % |
+40 |
+28 |
+39 |
+28 |
||||||||||||
MLC system-sales growth % |
+43 |
+30 |
+42 |
+30 |
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MLC Same-Store-Sales Growth % |
NA |
+14 |
NA |
+13 |
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Restaurant Margin % |
17.1 |
18.2 |
(1.1) |
(1.0) |
18.9 |
20.2 |
(1.3) |
(1.3) |
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Operating Profit |
90 |
65 |
+38 |
+26 |
191 |
141 |
+35 |
+24 |
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CHINA DIVISION COMMENTS
-
Mainland China delivered outstanding same-store-sales growth of 14%,
lapping +7% from 2007.
-
Mainland China traditional units were up 20% versus prior year with 95
new units opened during the quarter. Year-to-date, mainland China is
exceeding the pace of last year’s record
development which further strengthens our leadership position in the
rapidly growing restaurant industry.
-
Restaurant margin declined, as expected, largely due to continued high
food cost inflation. Commodity inflation was approximately $16 million
for the second quarter and $27 million year-to-date.
-
Foreign currency conversion benefited operating profit by $8 million
in the second quarter and $16 million year-to-date.
-
China results were negatively impacted by unforeseen expenses related
to the devastating earthquake in May and meaningful charitable
contributions to support the recovery effort.
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YUM! RESTAURANTS INTERNATIONAL DIVISION (YRI) |
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Second Quarter |
Year To Date |
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($ million, except restaurant counts and percentages) |
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% |
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% |
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2008 |
|
2007 |
Reported |
|
Excl |
2008 |
|
2007 |
Reported |
|
Excl |
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|
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Traditional Restaurants |
12,368 |
11,889 |
+4 |
NA |
12,368 |
11,889 |
+4 |
NA |
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System-Sales Growth % |
+15 |
+8 |
+15 |
+8 |
||||||||||||
Same-Store-Sales Growth % |
NA |
+4 |
NA |
+4 |
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Franchise & License Fees |
149 |
122 |
+22 |
+14 |
294 |
243 |
+21 |
+14 |
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Operating Margin % |
16.5 |
14.6 |
+1.9 |
+1.5 |
18.2 |
16.0 |
+2.2 |
+1.9 |
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Operating Profit |
120 |
101 |
+18 |
+9 |
259 |
220 |
+18 |
+11 |
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YRI DIVISION COMMENTS
-
YRI achieved same-store-sales growth of 4%, lapping +5% from 2007.
-
Traditional units were up 4% versus prior year with 160 new units
opened in over 20 countries during the quarter of which 97% were
opened by franchisees. Year-to-date, new-unit openings equal the
record pace of 2007.
-
Franchise fees, a key driver of our high-return business, grew by 22%
and are expected to reach approximately $675 million for the full-year.
-
The strength of foreign currencies versus the U.S. dollar benefited
operating profit by $9 million for the quarter and $16 million
year-to-date.
-
The loss of a VAT exemption in our Mexico business adversely impacted
restaurant margin percentage by more than one percentage point and
operating profit by $9 million during the second quarter. As
previously communicated, this loss is expected to negatively impact
restaurant margin percentage by more than one percentage point and
operating profit by more than $30 million for the full-year 2008.
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UNITED STATES BUSINESS |
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Second Quarter |
Year To Date |
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($ million, except restaurant counts |
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2008 |
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2007 |
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% Change |
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