Yum! Brands year-end net up despite tough fourth quarter

by FoodBusinessNews.net Staff
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LOUISVILLE, KY. — For the year ended Dec. 30, net income at Yum! Brands Inc. totaled $824 million, equal to $3.02 per share on the common stock, an increase of 8% from $762 million, or $2.66, in 2005.

Net revenue for the year rose a modest 2% to $9,561 million from $9,349 million following a tough fourth quarter in the U.S. division.

In the U.S. division, company sales fell 6% for the year, as the refranchising of company stores and negative publicity related to a produce-sourcing issue at Taco Bell negatively impacted sales.

In the International division, franchisee sales rose 7% and company sales rose 9% on the year. Company sales were positively impacted by the acquisition of the remaining 50% ownership of the Pizza Hut U.K. joint venture from Whitbread, which was completed in the fourth quarter. Excluding the impact of the acquisition and foreign exchange, company sales would have been even on the year.

In the China division, company sales rose 23% in local currency due to the continued strong expansion of both KFC and Pizza Hut brands in mainland China.

For the fourth quarter ended Dec. 30, net income rose 3% to $232 million, or 86c per share, up from $226 million, or 80c, in the fourth quarter of 2005.

Net revenue for the quarter totaled $3,016 million, up 4% from $2,899 million in the same period last year.

In the fourth quarter, the U.S. division saw company sales fall 11% as negative publicity regarding a produce-sourcing issue at Taco Bell significantly impacted sales.

In the International division, franchisee sales rose 5% and company sales rose 34% following the acquisition of the remaining 50% ownership of the Pizza Hut U.K. joint venture from Whitbread. Excluding the impact of the acquisition and foreign exchange, company sales would have risen 4% for the quarter.

Finally, in the China division, company sales rose 23% in local currency, due to continued sales growth in mainland China for both KFC and Pizza Hut.

Looking ahead, the company expects full-year 2007 e.p.s. growth of at least 10%, or $3.21 per share.

"As we look ahead to our expectations for 2007, we remain confident we can continue to build on our track record of growing e.p.s. at least 10% each year by generating 20% operating profit growth from our China division, 10% from our YRI division and 5% from our U.S. businesses," said David C. Novak, chairman and chief executive officer of Yum! Brands.

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