Yum! Brands income rises despite struggles in U.S.

by FoodBusinessNews.net Staff
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LOUISVILLE, KY. — Continued strength in international operations helped offset sluggish results in the United States at Yum! Brands, Inc. in the first quarter of fiscal 2007. Net income in the first quarter ended March 24 was $194 million, equal to 73c per share on the common stock, up 14% from $170 million, or 62c per share, in the same period a year ago.

Net revenue for the quarter grew 7%, totaling $2,223 million, compared with $2,085 million in the first quarter of 2006.

In the U.S. division, company sales fell 10%, while operating profit declined 11% to $165 million. Yum! Brands attributed the lower U.S. results to an E. coli outbreak in 2006 that caused more than 70 Taco Bell customers to become sick. Sales also were hurt by negative reaction following videos showing rats running through a New York City KFC/Taco Bell restaurant.

"The two incidents at Taco Bell resulted in adverse publicity and had the most significant impact on U.S. performance," said David C. Novak, chairman and chief executive officer. "We have taken immediate actions to address both incidents. We expect that the enduring strength of our brands and the plans we have in place will enable us to be back on track for improved U.S. performance during the second half of 2007."

In the International Division, sales rose 45% to $681 million, while operating profit rose 25% to $119 million.

In the China Division, company sales increased 18% in local currency due to the continued strong expansion of KFC and Pizza Hut. During the quarter, restaurant margin reached an all-time record. Operating profit grew 31% in local currency versus the same quarter last year.

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