Yum Outlines 2012 Expectations

Yum! Brands Inc. said its leading position in China and other emerging foreign markets would drive higher corporate earnings this year and robust growth next year, despite U.S. results that continue to struggle.

The Louisville, Ky.-based company on Monday raised its growth forecast for 2011 earnings per share to a year-over-year increase of 13 percent, up from an original projection of 12 percent, meaning profit would total at least $2.85 per share, excluding special items. In 2010, Yum booked profit of $2.53 per share, also excluding special items.

The parent company to KFC, Pizza Hut and Taco Bell will hold its annual Investor Day conference Wednesday, where it is expected to announce growth targets of at least 10 percent in earnings per share and the opening of 1,500 new locations in foreign markets for fiscal 2012. Next year's plans for the company's restaurant brands in the United States are limited to the refranchising of 400 locations, which Yum expects to book about $200 million in proceeds.

"We are well-positioned for another strong year in 2012, given our robust international new-unit development, innovative marketing and operating plans, as well as the opportunity to dramatically improve U.S. performance," Yum chairman and chief executive David Novak said in a statement.

United States: Yum is modeling 5-percent growth in operating profit for its struggling U.S. business next year, though no guidance was given for unit growth or same-store sales at any of its domestic brands.

Domestic same-store sales have remained flat or negative at all three brands this year, with Taco Bell yet to meaningfully recover from negative publicity stemming from a dismissed consumer lawsuit over its seasoned beef recipe. Novak said earlier this year that Taco Bell's turnaround would depend on a "breakthrough" product to be introduced early next year that "reinvents the taco."

China: Yum expects to increase operating profit by 15 percent. It projects at least 10-percent growth in its unit count, and same-store sales growth of at least 5 percent. Plans call for 600 new locations next year.

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Yum International: For Yum! Restaurants International, or the YRI business, Yum is projecting 10-percent growth in operating profit, based on projections of unit count growth between 3 percent and 4 percent and same-store sales growth between 2 percent and 3 percent. The company projects 800 new locations next year, in addition to 100 new locations in India, which will have its own corporate reporting division going forward.

Yum added that earnings next year should benefit from a foreign-currency translation benefit of about $30 billion, resulting from a $40 billion benefit in China and a $10 billion drag from YRI. The company also plans to reduce its share count by 2 percent through stock repurchases.

Yum operates or franchises more than 38,000 restaurants in more than 110 countries.

Contact Mark Brandau at mark.bradau@penton.com.
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