Yum! Brands Inc. (NYSE: YUM) today reported results for the first quarter ended March 21, 2009 including EPS growth of 14 percent, excluding special items. EPS including special items declined 10 percent due to the lap of a $0.13 per share gain in 2008 from the sale of our minority interest in KFC Japan.


  • Worldwide same-store sales growth of 1 percent driven by +2 percent in mainland China and +6 percent in Yum! Restaurants International (YRI), partially offset by a decline of 2 percent in the U.S.
  • International development continued at a robust pace with 256 new restaurants, including a record 98 new units in mainland China.
  • Worldwide system sales growth prior to foreign currency translation of +4 percent, including +12 percent in mainland China, +10 percent in YRI, and a 2 percent decline in the U.S.
  • Worldwide restaurant margin improvement of 1.4 percentage points was driven by the combination of pricing and moderating commodity inflation, as well as refranchising.
  • Worldwide operating profit growth of 7 percent, excluding special items and foreign currency translation, driven by net unit development, improved restaurant margins, and proactive cost management. Each of our divisions generated profit growth prior to foreign currency translation: +21 percent in China, +7 percent in the U.S. and +4 percent for YRI.
  • EPS growth also benefited from last year’s substantial share repurchases and a lower effective tax rate partially offset by negative foreign currency translation of approximately $0.02 per share

Note: All comparisons are versus the same period a year ago unless noted.

David C. Novak, chairman and CEO, says, “I’m very pleased to report better-than-expected first quarter EPS growth of 14 percent, before special items. The power of our global portfolio allowed us to overcome a challenging environment with system sales growth of 4 percent and operating profit growth of 7 percent, prior to foreign currency translation. I’m proud that our teams around the world are rising to the challenge by accelerating productivity initiatives and managing costs while we continue to drive and invest in our global growth strategies.

“Our China business drove strong results with system sales growth of 12 percent and profit growth of 21% prior to foreign currency translation. Importantly, we opened a record 98 new restaurants in mainland China and we are on track to open at least 475 new units for the full year. While sales in the U.S. were lower than anticipated, our U.S. business generated 7 percent profit growth with proactive reductions in our cost structure and margin improvement. U.S. same-store-sales declined 2 percent due to weakness at KFC and Pizza Hut. We are excited about the U.S. launch of KFC’s Kentucky Grilled Chicken, a great tasting product that will broaden the appeal of our brand.

“Our goal continues to be to deliver EPS growth of 10 percent this year in spite of the weak economy. We forecast the second quarter will likely be Yum’s most challenging quarter and the low point of our year. However for the full year, much lower-than-expected commodity inflation should offset below target same-store-sales growth. Looking ahead, we expect to enter 2010 with even stronger brands and competitive positions everywhere we do business. Longer term, the fundamentals driving the growth of our global portfolio remain intact and give us the unique ability to generate unparalleled international new unit development, significant free cash flow, and an industry-leading return on invested capital.”

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