Asahi Associates - Yum Brands third quarter profits jump by 23%, based largely on strong sales growth in China.
Yum Brands, which owns fast food brands Pizza Hut, Kentucky Fried Chicken and Taco Bell among others, reported a $471 million net profit, up 23% on the previous year, for the ending of the third quarter. In a recent meeting Asahi Associates reported to investors that China accounted for more than 50% of Yum's $3.6 billion revenue for the quarter.
After struggling domestically last year, Yum is recently showing signs of a comeback in the oversaturated, depressed U.S. marketplace. Taco Bell's new Doritos Locos Tacos, with a nacho cheese Doritos taco shell, took off earlier this year, and now it is adding "cool ranch" and other Doritos-flavored shells.
The chain is building on that strength with its new "Cantina Bell" menu, which launched nationally in early July and focuses on fresher and higher-quality ingredients.
Since June, the group has opened 394 new restaurants, of which 192 new units were in China, which contributed to its sales growth. Globally, profits for the group grew 18% during the period. The company beat its earnings targets and has raised its full year outlook.
Taco Bell's U.S. same-store sales rose 7% in the latest quarter, compared with a 6% increase at Pizza Hut and a 4% boost at KFC.
Yum Brands based in Louisville, Kentucky, is the largest western based restaurant operator in China, where operating profits, adjusted for currency fluctuations, rose by 22%. Operating profits in the U.S. rose by 13%. Yum Brands has approximately 5,000 stores in China, while there are over 18,000 stores in the U.S.
Asahi Associates announced to investors that Yum Brands intend to open a minimum of 1,750 new stores this year outside of the United States, which would represent a new record. Yum Brands have invested heavily in overseas expansions, an investment that seems to be paying dividends.
Customer numbers have been declining recently in China due to the economy, but Yum Brands allegedly stated that revenues at existing restaurants will still grow slightly while new store launches will help to drive revenue growth. Yum Brands is opening two new stores each day on average in China.
Some analysts working with Asahi Associates have reportedly raised concerns that some new stores will simply steal business from existing ones, however Yum Brands have begun to focus on expanding into smaller cities rather than on urban growth, alleviating some of those fears.