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Yum sees 3rd-quarter earnings rise 5 percent

Fast-food company Yum Brands Inc. said Tuesday its third-quarter profit grew by 5 percent, led by surging sales in its China operations that offset a decline in U.S. results.
/ Source: The Associated Press

Fast-food company Yum Brands Inc. said Tuesday its third-quarter profit grew by 5 percent as surging sales in its operations in China more than offset a sharp decline in U.S. results.

The parent company of Taco Bell, KFC and Pizza Hut reported worldwide same-store sales growth of 3 percent, marking its 20th straight quarter of global same-store sales growth.

Net income for the three months ended Sept. 6 rose to $282 million, or 58 cents a share, compared to $270 million, or 50 cents per share, in the year-ago period. Wall Street had forecast earnings of 54 cents per share.

Yum said its earnings benefited from a favorable tax rate and substantial share buybacks.

Quarterly revenues rose 11 percent to $2.8 billion.

Operating profit in Yum’s fast-growing Chinese operations rose 19 percent to $161 million.

Louisville-based Yum said it remains on pace to exceed last year’s record restaurant development in China and expects to reach 3,000 restaurants in mainland China by the end of the year. Quarterly restaurant margins in the division declined, mainly due to persistently high food cost inflation, primarily for chicken, the company said.

Yum’s international division had operating profit of $138 million for the quarter, up 9 percent from a year ago. Restaurant openings for the year continue to exceed last year’s record pace, the company said

Meanwhile, operating profit in the U.S. fell 16 percent to $158 million for the quarter.

In the U.S., Taco Bell and Pizza Hut are delivering solid same-store-sales and profit growth for the year, said Yum Chairman and CEO David C. Novak.

“Our KFC U.S. business continues to lag the rest of our global portfolio and is the driver of our underperforming profit in the U.S. business, along with unprecedented commodity inflation,” he said.

Novak predicted a turnaround at KFC next year with the rollout of its Kentucky Grilled Chicken.

Yum said it reaffirmed its full-year forecast of 12 percent earnings-per-share growth.

The company’s shares, which had fallen 81 cents, or nearly 3 percent, to end the regular session at $27.50, gained a penny to $27.51 in after-hours trading.