AP
Yum Brands 3Q Profit Jumps 17 Percent
Monday October 8, 7:06 pm ET
By Bruce Schreiner, Associated Press Writer
Yum Brands 3rd-Quarter Profit Jumps 17 Percent on Strong International, China Performance


LOUISVILLE, Ky. (AP) -- Fast-food giant Yum Brands Inc. said Monday its third-quarter profit rose 17 percent on the strength of surging sales in its international and China divisions that offset sluggishness in the United States, led by slumping Taco Bell.

The operator of KFC, Taco Bell and Pizza Hut reported 28 percent profit growth in its China division and 21 percent growth in its international division for the three months ended Sept. 8. Yum's U.S. operation had a scant 1 percent profit growth for the period.

Overall, net income rose to $270 million, or 50 cents per share, from $230 million, or 42 cents per share, in the same quarter a year ago. Analysts polled by Thomson Financial expected earnings per share of 45 cents.

Louisville-based Yum said it plans up to $4 billion in share repurchases in the next two years. The company predicted that 2007 will be the sixth straight year of exceeding its target of at least 10 percent annual earnings per share growth.

Yum's revenue rose 13 percent to $2.56 billion from $2.28 billion in the third quarter of 2006. Analysts predicted revenue of $2.44 billion.

Much of the increase was due to the company's international division, in which revenue jumped 43 percent. Quarterly revenue jumped 31 percent in Yum's China division, which includes mainland China, Thailand and KFC Taiwan.

In the U.S., meanwhile, revenue fell 6 percent. System same-store sales, including franchisees' sales, rose 1 percent from a year ago as growth in franchise performance offset a 1 percent decline for company restaurants.

Company same-store sales fell 6 percent at Taco Bell, which is trying to recover from an E. coli outbreak at some of the chain's East Coast restaurants last year that sickened 70 people. Yum's U.S. operations also were hurt by another setback -- a rat infestation in a New York City KFC/Taco Bell restaurant that was filmed by a TV news camera in February.

"Our U.S. business performance improved versus the first half of the year; however, sales and profit growth remains below our target level due to results at Taco Bell," said David C. Novak, Yum's chairman and chief executive.

Yum executives predicted improved Taco Bell results in the fourth quarter along with solid U.S. profit growth.

"We're starting to see signs the business is turning, and we expect the business will continue to recover into the fourth quarter and well into next year," Yum spokesman Jonathan Blum said of Taco Bell.

Year-to-date results also showed sharp contrasts between Yum's overseas and U.S. performance.

Through the third quarter, operating profit was up 25 percent in the China division and 21 percent higher in the international division. Meanwhile, operating profit was down 4 percent in the United States.

For the full year, Yum said it expects U.S. system-same-store sales and operating profit to be essentially even with last year.

The company's brands also include Long John Silver's and A&W All-American Food Restaurants.