Yum Beats On Earnings And Sees 'Dramatically Improved' Margins In China

KFC Yum Brands Taco BellWorkers set up a KFC billboard in Beijing, China.

Photo: Getty Images

Yum! reported adjusted earnings of $0.99 per share, against expectations of $0.97 per share. And the company saw margins improve “dramatically” on the quarter.Revenue of $3.57 billion however missed analyst estimates.

The stock was up nearly 4 per cent in after-hours trading immediately after the release but is paring some of its gains.

China comp store sales were up 6 per cent, right in line with expectations.

The company also raised its full year EPS guidance to “at least 13 per cent”.

And the company was positive on China. From the release:

“In China, our category-leading brands and competitive positions are stronger than ever. China system sales grew 22% as we opened 192 new restaurants and delivered same-store sales growth of 6%; operating profit grew 22%, prior to foreign currency translation.

Importantly, China restaurant margin performance improved dramatically from the second quarter, once again demonstrating the ongoing strength of our business model. This strong performance, combined with our new expectation to open over 750 high-return new restaurants this year, further demonstrates why we are so confident in the long-term growth of our China business.”

U.S. same store sales also came in strong, up 6 per cent. The breakdown showed 7 per cent growth at Taco Bell, 6 per cent growth at Pizza Hut and four per cent at KFC.

Meanwhile, Yum! opened 124 new stores in emerging markets this quarter.

The company will hold its conference call at 9:15 a.m. ET time tomorrow.

ORIGINAL

Yum! Brands is helping kick off earnings season, when it announces Q3 earnings after the bell today.

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We watch Yum! for insight on the Chinese economy.  Demand, especially for Yum’s KFC brand, is a good indicator of the health of the Chinese consumer.

For now, analysts expect earnings of $0.97 per share, on revenue of $3.64 billion.

Remember the company missed estimates last month. The stock is down 1.3 per cent in the final minutes of trading.

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