Yum! Brands Reports Full-Year EPS Decline of 9%
4 Feb 2014 --- Yum! Brands, Inc. has reported results for the fourth quarter ended December 28, 2013, including EPS growth of 4%, or $0.86, excluding Special Items. Reported EPS was $0.70 for the quarter and $2.36 for the year.
David C. Novak, Chairman and CEO said, “While 2013 was a challenging year, I’m pleased to report continued progress as we enter 2014 with fourth-quarter EPS growth of 4%, excluding Special Items. More importantly, with the decisive actions we've taken to strengthen our company across the board, we are well positioned to deliver double-digit EPS growth in 2014 and the years ahead.
In China, we strengthened our poultry supply chain, made significant progress rebuilding consumer trust in the KFC brand and made substantial gains in restaurant productivity. At Pizza Hut Casual Dining, we increased our asset base by 28%, grew same-store sales by 4% and expanded breakfast into over 120 restaurants. We also achieved solid unit economics at Pizza Hut Home Service, and intend to scale this business over time. Overall, we opened 740 new restaurants in China, further strengthening our category-leading positions.
Outside of China, our franchise-led system opened over 1,200 new international restaurants, including more than 70% in high-growth emerging markets. Additionally, we continued to make investments ahead of the growth curve in India as we opened over 150 new units. In the U.S., Taco Bell delivered its eighth consecutive quarter of same-store sales growth and we are enthusiastic about our upcoming national breakfast launch. We are also excited about our plans at Pizza Hut to nationally advertise WingStreet and its award-winning chicken wings for the first time.
Importantly, as of January 1, 2014, we combined our Yum! Restaurants International and U.S. divisions into three global brand divisions: KFC, Pizza Hut and Taco Bell. China and India will remain separate divisions given their strategic importance and enormous growth potential. This new structure is designed to drive greater brand focus and lead to even more aggressive global growth.
We are confident we have the people and resources to deliver at least 20% EPS growth in 2014 and re-establish our track record of double-digit EPS growth.”
China Division sales and profits were significantly impacted by the effects of the December 2012 poultry supply incident, as well as subsequent news of avian flu. System sales declined 4% for the year and grew 3% in the quarter, prior to foreign currency translation. ? KFC same-store sales declined 15% for the year and 4% in the quarter. Pizza Hut Casual Dining same-store sales grew 4% for the year and 5% in the quarter. China Division opened 740 new units during the year, including 282 units in the quarter. For the year, KFC opened 428 new units, Pizza Hut Casual Dining opened 247 new units and Pizza Hut Home Service opened 49 new units.
YRI Division system sales increased 5% for the year and 6% for the quarter, prior to foreign currency translation. The system sales increases were driven by record new-unit development and same-store sales growth of 1% for the year and 2% for the quarter. ? Emerging markets system sales grew 11% for the year, driven by 7% unit growth and 4% same-store sales growth. For the quarter, system sales grew 11%, driven by 7% unit growth and 3% same-store sales growth. Developed markets system sales grew 1% for the year, including 1% unit growth. Same-store sales were even. For the quarter, system sales grew 3%, driven by 1% unit growth and 1% same-store sales growth. YRI opened a record 1,055 new units in 78 countries. This included 488 new units in the fourth quarter. ? For the year, 703 of these units were opened in emerging markets. 89% of all new units during the year were opened by franchisees.
Restaurant margin was even for the year. Restaurant margin declined 1.4 percentage points for the quarter, as a result of margin performance in KFC UK. Operating profit growth was 10% for the year, prior to foreign currency translation. This included a benefit of 3 percentage points from refranchising the Pizza Hut UK Dine-In business in the fourth quarter of 2012. Foreign currency translation negatively impacted operating profit by $25 million for the year and $14 million for the quarter.
