Yum Brands reported first-quarter earnings of $US0.87 per share ex-items, on revenue of $US2.72 billion.
This beat expectations for Q1 adjusted earnings of $US0.84 per share, but missed on top line, with analysts looking for $US2.79 billion.
Earnings per share were up 24% from a year ago.
Q1 China same-store sales were up 9%, missing expectations for a 9.4% rise. This included growth of 11% at KFC and 8% at Pizza Hut Casual Dining.
China Division’s Q1 sales include just January and February results and includes the Chinese New Year holiday, a peak season for China Division.
Yum derives a large part of its revenue from China, so investors watch for clues on the health of the Chinese consumer. Yum’s earnings took a hit last quarter after concerns over the bird flu and food safety saw China sales take a hit.
“China Division system sales increased 17% and restaurant margins were 23.4%,” CEO David Novak said in a press release. “Importantly, KFC results continued to improve with an 11% same-store sales increase in the quarter. We are building off this sales momentum and are encouraged by our recent Menu Revamp, which features the simultaneous launch of 15 exciting products. At Pizza Hut Casual Dining, we had strong performance across every measure.”
Novak says he expects to open 700 new restaurants in China this year.
A breakdown showed that total Pizza Hut same-store sales were down 2%, missing expectations for a 2% rise. KFC saw 1% increase in same-store sales growth, while Taco Bell saw a 1% decline in same-store sales.
“We experienced disappointing U.S. results, which were impacted by unusually severe weather,” according to Novak. “We have confidence in our plans to drive balance of year improvement and are particularly pleased with the initial results of our recent Taco Bell breakfast launch.”
On Monday, JPMorgan downgraded Yum to “neutral” from “overweight” with a price target of $US80. The analysts said the stock price is “fairly pricing in China recovery.”
Year-to-date through April 21, Yum repurchased 2.3 million shares totaling $US170 million.
The stock is up 3.7% after hours.
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