On a GAAP basis, Yum posted an EPS loss of $0.20 in the quarter, which the company attributed to a write-down of $361 million on impairment charges related to its Little Sheep restaurant chain in China.
For the full year, Yum reported revenues of $13.28 billion and adjusted EPS of $3.09, compared with revenues of $13.08 billion and EPS of $2.97 in 2013. Consensus estimates called for EPS of $3.14 on revenues of $13.23 billion. On a GAAP basis, EPS totaled $2.32.
Sales in China rose 1% for the year but decreased 11% in the fourth quarter as a result of the tainted chicken issued that surfaced last year. Same-store sales in China declined 5% for the year and 16% in the quarter.
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The KFC division saw sales rise 6% for the year and 7% in the quarter, and same-store sales rose 3% for the year and 4% for the quarter.
Sales at Taco Bell rose 4% for the year and 9% in the quarter. Same-store sales rose 3% for the year and 6% for the quarter. Margins improved to 20.6% and operating profit rose 20% in the quarter.
The company’s CEO said:
Our top priority is to recover sales in China and capture the significant profit leverage we have in this business. While the sales recovery in China continues to be slower than expected, we anticipate a strong second half of 2015 as the turnaround gains momentum, led by menu innovation across the year. We continue to firmly believe in the long-term potential of China and will open at least 700 new units in what remains the world’s fastest-growing economy. … Outside of China, we are pleased with the momentum we are seeing across the KFC and Taco Bell divisions. We expect KFC’s strong results to sustain into 2015 as robust international performance, coupled with an improving U.S. business, drive solid sales and profit growth.
The Taco Bell results were strong, but the hoped-for sales boost from the improvements at Pizza Hut did not deliver the sales hike that Yum expected. The company says it is committed to same-store sales growth, building new stores, and generating high returns on invested capital. Yum opened more than 2,000 stores in 2014 and plans to open another 2,100 or more in 2015, mostly in emerging markets (i.e., China and India). Well, it is building a lot of new stores.
Investors must have liked what they heard, though, because they bid the stock up about 2% in the after-hours session to $75.14, in a 52-week range of $65.81 to $83.58. The consensus price target for the stock is $79.00.
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