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Analysts: Yum! Q1 2010 earnings good prognosis for pizza
April 15, 2010
Pizza Hut parent company Yum! Brands' earnings report for the first quarter that ended March 20 showed the company digging out of negative numbers, and Pizza Hut seems to be helping the upward trend.
"In the U.S., we are pleased we have seen significant sales improvement since the fourth quarter, particularly at Pizza Hut," Yum! chairman and CEO David Novak said in a company statement. That lift can be attributed to $10 pizza sales and the company's new nostalgic spots with The Martin Agency which debuted in January.
But news was not all good stateside, as he lamented profits, which were down 9 percent.
China continued to be Yum!'s strong point: China Division system sales growth of 15 percent was driven by new unit development of 14 percent and same-store-sales growth of 4 percent. In the separate International Division, same-store sales declined 2 percent, including a negative 1 percentage point impact from the timing of Chinese New Year.
In the United States, same-store sales declined 1 percent, including an increase of 5 percent at Pizza Hut and declines of 2 percent at Taco Bell and 4 percent at KFC.
Net income for Yum! was $241 million, up 10 percent from Q1 2009, which was $218 million. Revenue was $2.3 billion, up 6 percent from $2.2 billion in Q1 2009.
Yum! stock has spiked slightly since the earnings report was released on Wednesday, trading at a year-long high of $43.57 Thursday before winding back down Friday.
Analysts say the earnings are a good prognosis for Yum! – and pizza.
"Specifically in the case of Yum!, the big news wasn't so much the slightly lower U.S. sales as much as the solid international revenue picture," said Benjamin Shepherd, editor of Louis Rukeyser's Mutual Funds financial newsletter. He said near-inflation housing markets and upward-trending same-store sales from high-end retailers foreshadow continued growth for the pizza sector, where discretionary spending goes first.
"I still believe that for both the short- and medium-term, things look good for Domino's and Yum!. I believe they'll both see improving sales here in the U.S. as the economy continues to improve and solid international growth."
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