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Yum! Brands Earnings Disappoint on Weak China Sales

Wednesday, October 5, 2016 13:57
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YUM logoQuick service restaurant chain operator Yum! Brands, Inc. (NYSE:YUM) late today posted weaker-than-expected third quarter earnings results, hurt by a sales slump in its Chinese locations.

The Louisville-based company reported Q3 EPS of $1.09, narrowly missing analysts’ view of $1.10. Revenue slid 3.3% from last year to $3.32 billion, also falling short of Wall Street’s $3.49 billion estimate.

On a positive note, YUM lifted its core operating profit growth forecast to “at least +15%” from “at least +14%.”

Other interesting notes from the release included:

  • KFC Division same-store sales increased 4%.
  • Taco Bell Division same-store sales increased 3%.
  • China Division system sales increased 3%, excluding foreign currency translation, but same-store sales decreased 1%.

From the press release:

Sales were off to a good start in the first six weeks of the quarter in the China Division. However, anticipated tougher laps in the second half of the third quarter were compounded by an international court ruling on claims regarding the South China Sea, which triggered a series of regional protests and negative sentiment against a few international companies with well-known Western brands. If not for this event, we believe the China Division would have delivered its fifth consecutive quarter of positive same-store sales growth. The good news is the incident was short-lived and the sales impact continued to dissipate through August and September. Despite the protests, Pizza Hut Casual Dining continued its trend of quarterly sequential improvement.


YUM shares fell $2.01 (-2.27%) to $86.61 in after-hours trading Wednesday. Prior to today’s report, YUM had surged 21.31% year-to-date, versus a 5.76% gain in the benchmark S&P 500 during the same period.

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