Yum! Brands: Reports First-Quarter 2018 Results

Louisville / KY. (yb) Yum! Brands Inc. reported results for the first quarter ended March 31, 2018. First-quarter GAAP EPS was USD 1.27, an increase of 66 percent. First-quarter EPS excluding Special Items was USD 0.90, an increase of 38 percent.

Greg Creed Comments

Greg Creed, CEO, said «As we begin the second full year of our transformation journey, I’m pleased with our progress towards becoming a more focused, more franchised and more efficient company. As a result of the timing mismatch between refranchising and associated G+A savings and the new revenue recognition accounting standard, core operating profit growth was flat, which is consistent with our expectations. We’re maintaining all aspects of our full-year 2018 guidance and remain confident that this transformation is building a strong foundation for long-term growth and will deliver increased returns for our stakeholders».

First-Quarter Highlights

• Worldwide system sales excluding foreign currency translation grew 4 percent, with KFC at 6 percent, Taco Bell at 4 percent and Pizza Hut at 2 percent.
• We opened 239 net new units for 3 percent net new unit growth.
• We refranchised 144 restaurants, including 52 KFC, 43 Pizza Hut and 49 Taco Bell units, for pre-tax proceeds of USD 205 million. We recorded net refranchising gains of USD 156 million in Special Items. As of quarter end, our global franchise ownership mix was 97 percent.
• We repurchased 6.5 million shares totalling USD 528 million at an average price of USD 81.
• We reflected the change in fair value of our investment in Grubhub by recording USD 66 million of pre-tax investment income, resulting in USD 0.16 in EPS.
• Foreign currency translation favourably impacted divisional operating profit by USD 16 million.

All comparisons are versus the same period a year ago. As required, we adopted a new accounting standard on revenue recognition effective January 1, 2018. Prior year results have not been restated for this change. See the Other Items section of this release for further details.

System sales growth figures exclude foreign currency translation (F/X) and core operating profit growth figures exclude F/X and Special Items. Special Items are not allocated to any segment and therefore only impact worldwide GAAP results. See reconciliation of Non-GAAP Measurements to GAAP Results within this release for further details.

KFC Division

• KFC Division opened 262 new international restaurants in 42 countries.
• Operating margin increased 5.3 percentage points driven by refranchising and same-store sales growth, partially offset by the gross up of advertising fund revenues and offsetting expenses required by the revenue recognition accounting standard.
• Foreign currency translation favourably impacted operating profit by USD 13 million.

Pizza Hut Division

• Pizza Hut Division opened 148 new international restaurants in 39 countries.
• Operating margin decreased 0.6 percentage points driven by the gross up of advertising fund revenues and offsetting expenses required by the revenue recognition accounting standard, partially offset by refranchising.
• Foreign currency translation favourably impacted operating profit by USD 3 million.

Taco Bell Division

• Taco Bell Division opened 56 new restaurants, including 11 new international restaurants.
• Operating margin decreased 2.7 percentage points driven by the gross up of advertising fund revenues and offsetting expenses required by the revenue recognition accounting standard and higher restaurant-level costs, partially offset by refranchising and same-store sales growth.