Yum raises forecast as China sales still surge

YUM-RESULTS:Yum raises forecast as China sales still surge

 October 10, 2012, 3:54 IST

 10 10, 2012, 04:00 IST

 

KFC parent Yum Brands Inc raised its full-year outlook on Tuesday after sales in China held up despite cooling economic growth in that market, the restaurant company's largest.

Shares of Yum, whose other chains include Pizza Hut and Taco Bell, rose 3.6 percent after the company also reported a third-quarter profit that topped Wall Street's expectations.

Louisville, Kentucky-based Yum is the biggest Western restaurant operator in China, with more than 4,000 KFC shops and almost 740 Pizza Hut restaurants. It is widely viewed as a way for U.S. investors to bet on what is still the world's fastest-growing major economy.

In the latest quarter, China contributed more than half of Yum's overall revenue of $3.57 billion.

Prior to Tuesday's report, concerns about China - which contributes roughly 40 percent of Yum's profit - had helped send shares in Yum down roughly 10 percent from an all-time high of almost $75 in April.

But Yum's same-restaurant sales in the country rose 6 percent for the quarter. That result matched the gain analysts polled by Consensus Metrix had expected.

China's restaurant margin increased 0.1 percentage points to 21.4 percent, even as wage rates spiked 8 percent and commodity prices increased 2 percent.

Yum's net income for the quarter, ended September 8, rose to $471 million, or $1 per share, from $383 million, or 80 cents per share, a year earlier.

Excluding a gain from refranchising restaurants, Yum earned 99 cents per share, topping analysts' average forecast by 2 cents per share, according to Thomson Reuters I/B/E/S.

Based on that performance, Yum now expects to earn at least $3.24 per share for the full year, up from the $3.22 it previously forecast.

The stock, which closed at $66.04 on the New York Stock Exchange, jumped to $68.40 in extended trading.

(Editing by Steve Orlofsky)