Tomorrow Yum Brands, the owner of KFC, Pizza Hut, and Taco Bell, will report quarterly results, with analysts eagerly anticipating what the company will have to report on the Chinese market.Last year the fast-food operator saw 44.1 per cent of sales driven by its Chinese division, topping the U.S.’s 30.0 per cent contribution. For 2012, Yum reported revenue of $12.6 billion and net income of $1.8 billion.
Analysts forecast Yum will earn $0.73 a share this quarter on revenue of $2.7 billion, a 12 per cent increase from the year ago quarter.
“For now the China business appears to be comping well against difficult compares, which was a key question mark for 2012,” Jason West at Deutsche Bank says. “YUM expects China comps to moderate over the balance of 2012 as compares get tougher, though the timing and magnitude of this moderation is difficult to call.”
West forecasts same-store sales to increase by at least 15.0 per cent in China, before decelerating to 11.3 per cent for the full year. The company plans on opening more than 600 stores in China this year, following a year of blistering expansion in 2011.
If stores in China can continue to pump out strong results, it will offer a sign that the country’s growing middle class is continuing to spend. The Chinese economy slowed at the start of 2012, with the government saying GDP increased by 8.1 per cent during the first quarter. Just a few months earlier the country logged expansion of 8.9 per cent.
Yum’s connection to China has solidified as its original core operations in the U.S. have fallen on hard times. Although same-store sales turned positive in the U.S. at the end of 2011, the results remain lackluster.
To help boost Taco Bell, which drives a majority of U.S. net income, the company has rolled out its first breakfast menu at select locations and a taco shell made from Doritos.
Yum will report after U.S. markets close.