Strong China results boost Yum! earnings

by Eric Schroeder
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LOUISVILLE, KY. — Strong sales and exceptional strength in China helped drive a 23% increase in earnings at Yum! Brands, Inc. in the third quarter. Net income in the period ended Sept. 8 totaled $471 million, equal to $1.02 per share on the common stock, up from $383 million, or 82c per share, in the same period a year ago.

Total revenues rose 9% to $3,569 million from $3,274 million.

For the nine months ended Sept. 8, net income was $1,260 million, or $2.72 per share, up 31% from $963 million, or $2.05 per share, in the same period a year ago. Net sales were $9,480 million, up 11% from $8,515 million.

“Very strong sales and profit at all of our divisions, including China, Yum! Restaurants International, India and the U.S., drove 19% third-quarter e.p.s. growth,” said David C. Novak, chairman and chief executive officer.

Operating profit in the company’s U.S. division totaled $162 million in the third quarter, up 13% from $143 million in the same period a year ago. Total revenues fell 10% to $787 million from $873 million, but same-store sales increased 6%, including growth of 7% at Taco Bell, 6% at Pizza Hut and 4% at KFC.

Third-quarter operating profit within the China division rose 24% to $374 million from $301 million, while sales increased 24% to $1,988 million from $1,600 million. Same-store sales in China increased 6%. Yum! said it opened 192 new units in China during the third quarter and expects a record new-unit development of at least 750 units during fiscal 2013.

Operating profit in the Yum! Restaurants International division totaled $173 million in the third quarter, up 7% from $163 million in the same period a year ago. Total sales eased 1% to $769 million from $779 million.

As a result of the strong third quarter, Mr. Novak said Yum! Brands is raising its full-year e.p.s. growth forecast to at least 13%, or at least $3.24, excluding special items.

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