Upbeat outlook at Yum!

by Erica Shaffer
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LOUISVILLE – Yum! Brands, Inc. just couldn't hold back the good news. The company announced ahead of its annual investor meeting that mid-single-digit earnings per share growth for full-year 2014 and at least 10 percent EPS growth in 2015, excluding Special Items.

Yum! noted that negative publicity surrounding improper food handling practices by a former supplier significantly impacted sales in its China Division. However, sales are recovering although at a slower pace than expected. Therefore, the Yum! estimated China Division full-year same-store sales will be negative mid-single digits.

"With this assumption, we now estimate mid-single-digit full-year EPS growth, excluding Special Items," the company said.

Greg Creed, CEO effective Jan. 1, said, “We are firmly committed to returning to double-digit EPS growth in 2015, delivering at least 10 percent growth with the potential to do significantly better. We fully expect to bounce-back in China and benefit from tremendous sales leverage as sales rebound. We have solid plans to drive same-store sales growth and margin improvement in China, while continuing to open new restaurants with confidence in the world’s fastest-growing economy. Further, sustained momentum at our KFC and Taco Bell Divisions, and the recent relaunch of our Pizza Hut US business are also expected to contribute to our double-digit EPS growth. Our brands are the global leaders in their respective categories, and we expect to build on this strength with breakthrough product innovation, insight-driven marketing and digital leadership in the years ahead.”

Guidance for 2015 includes:

• China Division operating profit growth of at least 15 percent
• KFC Division operating profit growth of 10 percent
• Pizza Hut Division operating profit growth of 10 percent
• Taco Bell Division operating profit growth of 6 percent
• Over 2,100 gross new international units
• Global capital expenditures of approximately $1.2 billion
• Estimated tax rate for years 2015 – 2016 between 25 percent and 27 percent
• Foreign currency translation expected to have a negative impact of at least $20MM on earnings
• Interest expense expected to be about $145MM
• 2 percent reduction in average diluted shares outstanding as a result of share repurchases

“Overall, we expect to open over 2,100 new international restaurants next year, further strengthening our lead in emerging markets,” Creed said. “We remain focused on the three keys to driving shareholder value: same-store sales growth, new-unit development and generating high returns on invested capital. I’m confident we’ll deliver full-year EPS growth of at least 10 percent in 2015 and produce consistent double-digit EPS growth over the long term.”

The new international units include:

• 700 new units in China;
• 700 new units at KFC;
• 600 new units at Pizza Hut
• 125 new units in India; and
• 150 net new units at Taco Bell Division.

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