Yum! Brands expects strong recovery in 2014

Dec. 3, 2013

Yum! Brands Inc. reconfirmed its full-year 2013 EPS forecast of high-single to low double-digit decline versus the prior year, excluding special items. Specifically, Yum! expects to deliver at least 20 percent EPS growth in 2014, signifying a turnaround from this year when the company was hampered by supply chain and avian flu issues in China, its largest market.

"We expect to have a strong bounce back in 2014 following a year that is clearly below our high expectations. In China, we have an aggressive plan to reignite sales at KFC and we expect continued strong performance at Pizza Hut Casual Dining. In addition, our international new-unit development pipeline remains extremely robust," said David C. Novak, chairman and CEO.

The company plans to open at least 1,850 new restaurants outside of the United States. Of those, Yum! plans 700 new units in China and 150 new units in India.

Domestically, it anticipates a boost from the upcoming national breakfast launch at Taco Bell.

"With our recent announcement to combine our Yum! Restaurants International and U.S. individual divisions for KFC, Pizza Hut and Taco Bell, effective January 1, 2014, we are well positioned to more aggressively accelerate growth in the years ahead," Novak added. "We remain focused on the three keys to driving shareholder value: new-unit development, same-store sales growth and generating high returns on invested capital."

China update

After months of double-digit negative performances, November same-store sales increased an estimated 1 percent for the China Division. This estimate included even sales at KFC, buoyed by a limited-time "Half Priced" bucket promotion, which yielded an approximate 16 percent increase in KFC same-store sales for the first 10 days of the month. KFC same-store sales were down approximately 8 percent for the remainder of November. This promotion is not carrying over into December.

Prior to Yum!'s Investor Day Wednesday, attention now turns to a confirmed case of the H7N9 bird flu strain, reported this week in Hong Kong. The city is on a public health alert because of the case and has suspended live chicken imports from the mainland.

Meanwhile, China's Pizza Hut Casual Dining system experienced a 7-percent growth in sales.

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Topics: Franchising & Growth , Operations Management , Pizza Hut

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