Restaurant operator Yum! Brands Inc. (YUM) said Monday after the markets closed that its fourth quarter profit fell 5% from last year, hurt mainly by a U.S. pension settlement charge and losses related to the refranchising of the company's Pizza Hut UK Dine-in restaurants as well as a higher effective tax rate.
However, the company's quarterly earnings per share, excluding items, just managed to beat analysts' estimate as did its quarterly revenue.
At the same time, the company said it expects full year 2013 adjusted earnings per share to decline in mid-single digit percentage as compared to full year 2012. In November, the company said it expected to deliver at least 10% adjusted earnings per share growth in 2013.
David Novak, Yum! Brands Chairman and CEO, said, "Aa result of adverse publicity from the poultry supply situation in mid-December, China KFC sales experienced a sharp decline. Due to continued negative same-store sales and our assumption that it will take time to recover consumer confidence, we no longer expect to achieve EPS growth in 2013."
Yum! Brands shares are currently losing 5.54% in after hours trading after closing the day's regular trading session at $63.94, down $1.99 or 3.02%. The shares trade in a 52-week range of $61.05 to $74.75.
Given current uncertainties related to KFC sales in China, it is difficult to confidently forecast our overall financial performance. We have made the assumption that KFC China same-store sales will improve as the year progresses and will be positive in the fourth quarter.
Total revenue for the company's all-important China division rose 14% to $2.14 billion in the fourth quarter from $1.88 billion a year ago. However, the division's same-store sales for the quarter fell 6%.
The company noted that China Division KFC same-store sales turned sharply negative during the last two weeks of December due to adverse publicity surrounding an investigation by the Shanghai FDA into poultry supply management at Yum! China.
The investigation was prompted by a report broadcast on China's national television on December 18, which showed that a few poultry farmers were ignoring laws and regulations by using excessive levels of antibiotics in chicken. Some of that product was purchased by two poultry suppliers of KFC China.
The company said that the Shanghai FDA concluded its probe on January 25 and provided "Supervisory Recommendations" to Yum! China to strengthen its poultry supply chain practices. However, no case was brought against Yum! China and no fine was imposed.
Fourth quarter revenue for Yum! Restaurants International division increased 1% to $1.034 billion from $1.025 billion last year. The division's same-store sales for the quarter grew 3%.
Total revenue for the company's U.S. division fell 20% to $947 million from $1.18 billion a year earlier. The division's same-store sales for the fourth quarter increased 3%, driven by growth of 5% at Taco Bell, 4% at KFC and offset by a decline of 1% at Pizza Hut.
For the fourth quarter ended December 29, 2012, the Louisville, Kentucky-based company reported net income of $337 million or $0.72 per share, compared to $356 million or $0.75 per share for the year-ago quarter.
Excluding special items, earnings for the latest quarter were $0.83 per share.
On average, 24 analysts polled by Thomson Reuters expected the company to earn $0.82 per share for the fourth quarter. Analysts' estimates typically exclude special items.
Total revenue for the fourth quarter grew 1% to $4.15 billion from $4.11 billion in the same quarter last year. Twenty-two analysts had a consensus revenue estimate of $4.12 billion for the fourth quarter.
During the fourth quarter, the company repurchased 4.1 million shares of its common stock for $283 million, taking the full year total to 14.9 million shares repurchased for $985 million.
by RTT Staff Writer
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