Yum Brands’ net income earnings up 10 percent

April 20, 2011

Yum! Brands Inc. reported results for the first quarter ended March 19, which included a net income of $264 million, a 10 percent increase from the same period last year at $241 million. Revenue increased by nearly 3 percent from Q110.

The company was given a huge boost from its China Division, which was up 28 percent. Of the 223 restaurants opened during Q111, 92 of them were in China.

Meanwhile, numbers from both the Yum! Restaurants International (YRI) and U.S. segments were down from the same period last year. YRI's revenue was down 5 percent, however operating profit increased 8 percent.

In the U.S., operating profits dropped 13 percent, and revenue was down 9 percent. System sales were also down a percentage point.

Earnings per share for the quarter were 54 cents, compared with 50 cents per share in 2010.

First quarter earnings included a charge of $66 million stemming from Yum!'s decision to sell its Long John Silver's and A&W All American Food brands.

David C. Novak, chairman and CEO said he was pleased to report such a strong international performance this quarter.

"Our China business continues to fire on all cylinders. This strong increase in traffic gives us even more confidence that our category-leading brands in China are stronger than ever, and well positioned for sustained growth ahead. Yum! Restaurants International operating profit increased 8 percent, led by outstanding performance in high-growth emerging markets, where system sales grew 10 percent. Importantly, we continue to build scale in India, the second-largest emerging market, where system sales were up 42 percent," Novak said.

He also acknowledge an "unexpected" 13 percent decline in U.S. profits, attributing commodity inflation and a significant reversal in sales trends at Taco Bell stemming from its now-dropped lawsuit over food quality and subsequent negative publicity.

"Given Taco Bell's category leadership we remain bullish on its long-term growth strategy," Novak said. "Looking ahead, our international performance and trends are strong, and new unit development is robust. We expect the continued strength of both our China and YRI businesses to overcome a challenging year in the U.S., and that 2011 will be the tenth consecutive year we achieve our annual target of at least 10 percent EPS growth."

Topics: Business Strategy and Profitability , Financing and capital improvements , Operations Management , Pizza Hut

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