News

Yum Brands Q2 financials steady as company accelerates Pizza Hut improvement plans

August 3, 2017

Yum Brands Q2 financial results, for the term ending June 30, show the company's three brands all had worldwide system sales growth, including a 7 percent increase at KFC, 7 percent increase at Taco Bell and 2 percent increase at Pizza Hut. The company's quarterly GAAP EPS also came in 10 percent lower at 58 cents, while Q2 EPS excluding Special Items increased 21 percent to 68 cents, a news release said. 

"I'm pleased Yum! Brands' intensified focus on our four distinct growth drivers helped deliver another successful quarter," Yum CEO Greg Creed said in the release. "Core operating profit grew 19 percent and EPS, excluding special items, grew 21 percent during the second quarter. We are maintaining our full-year 2017 guidance and are on pace with our multi-year transformation strategy designed to further unlock shareholder value."

Other Q2 highlights include: 

• 3 percent net new unit growth, with 174 net new units opened. 

• Global franchise ownership mix hits 94 percent Q2, with 244 restaurants refranchised, including 40 KFC, 163 Pizza Hut and 41 Taco Bell units, for proceeds of $136 million. 

• Refranchising gains of $19 million in Special Items. 

• 5.6 million shares repurchased at $68 average price for $384 million total. 

• $6 million negative impact to GAAP operating profit from foreign currency translation. 

Individual brand performance

At KFC, operating margin increased 5.4 percentage points, driven by same-store sales growth, refranchising, reduced G&A and higher initial and renewal fee income partially offset by higher restaurant operating costs.

At Pizza Hut, operating margin increased 7.8 percentage points driven by refranchising partially offset by increased G&A related to litigation costs.

At Taco Bell, system sales grew 7 percent, while restaurant margin grew 0.5 percent to 22.8 percent, driven by same-store sales growth partially offset by food and labor inflation. Operating margin increased 3.6 percentage points, driven by same-store sales growth, reduced G&A and refranchising partially offset by food and labor inflation.

Finally, the company said it had a $16 million non-cash charge in Special Items as the result of "ongoing impact of share-based compensation award modifications made with the company's separation of Yum China Holdings, Inc." And in May, the company entered into a Transformation Agreement with Pizza Hut U.S. franchisees to improve that brand's marketing alignment, improve operations and technology more quickly and permanently increase advertising, digital and technology contributions from franchisees.