Parent of Taco Bell, KFC, Pizza Hut tops 2Q profit forecasts

25-Jul-2016 - USA

Yum Brands Inc. shares jumped in extended trading Wednesday after the parent company of Taco Bell, KFC and Pizza Hut reported a better-than-expected profit for its second quarter despite soft sales at some of its brands.

The results come as Louisville, Kentucky-based Yum prepares to split off its China unit later this year into a separate company. China has been a critical region for Yum, which is a dominant player in the country's fast-food industry with more than 5,000 KFC locations. In recent years, however, Yum's China unit has struggled as a result of supplier food scares and marketing missteps.

Yum said Wednesday the separation process remains on track and it expects to complete it around Oct. 31.

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The company earned $339 million, or 81 cents per share, for the period. Earnings, adjusted for non-recurring gains, were 75 cents per share. That topped market expectations of 74 cents per share, according to analysts polled by Zacks Investment Research.

Yum's revenue fell 3 percent to $3.01 billion, just short of expectations of $3.1 billion.

Splitting from the China business will leave the remaining company more heavily focused on its U.S. operations, where the performance of its three chains has been mixed. The push to increase sales at Yum's three chains in the U.S. comes amid intensifying competition from traditional rivals such as McDonald's and Burger King, as well as smaller players.

The company said sales at its established sites jumped 2 percent at the KFC division, while they were flat at Pizza Hut and fell 1 percent at Taco Bell. This same measure in China was flat, with an increase of 3 percent at KFC there offset by an 11 percent drop at Pizza Hut.

Yum shares rose nearly 5 percent in after-hours trading following the report. Its shares have increased 17 percent since the beginning of the year, while the Standard & Poor's 500 index has increased slightly more than 5 percent. (dpa)

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