Restaurant chains operator Yum! Brands Inc. (YUM) said Friday that it continues to expect adjusted earnings per share growth of 12% for fiscal 2009. The company also sees fiscal 2010 earnings per share growth excluding special items of at least 10%.
The company affirmed the fiscal 2009 outlook in advance of its annual investor meeting, scheduled for December 9, and attributed the affirmation to combined new unit development of 1,400+ in China and Yum! Restaurants International, or YRI.
While announcing third-quarter results on October 6, Yum! Brands, the world's largest restaurant company in terms of system restaurants, had raised its full-year 2009 adjusted earnings forecast to $2.14 per share or 12% growth from its prior forecast of $2.10 per share or 10% growth.
On average, 18 analysts polled by Thomson Reuters expect fiscal 2009 earnings per share of $2.16 for the year. Analysts' forecast typically excludes one-time items.
Further, Yum! Brands said that its full-year 2009 system sales growth, excluding foreign currency translation, is estimated to be 9% in mainland China and 5% in YRI. The company also sees same-store-sales decline of 4% in the U.S. In addition, full-year negative foreign currency translation impact is expected to be about $45 million.
For the fourth quarter, the company's same-store-sales performance is projected to be down 3% in mainland China, 1% in YRI and 8% in the U.S.
The company also said that fiscal 2010 would mark the ninth straight year of meeting or exceeding annual earnings per share growth target.
Commenting on the guidance, David Novak, chairman and chief executive officer of Yum! Brands, stated, "2009 has been a year of solid performance led by our China and Yum! Restaurants International businesses, and we remain on track to deliver 12% EPS growth. This performance has been driven by our industry leading international new unit development, favorable commodity costs, productivity gains across our businesses and a lower effective tax rate."
Novak also said that Yum! Brands was able to improve on its industry leading Return on Invested Capital, or ROIC.
Further, he said that the company's biggest challenge continues to be driving same-store-sales growth in the difficult consumer environment. "All indications are that 2010 will be another challenging year, and we have built our plans accordingly," Novak noted.
For fiscal 2010, the company plans to deliver at least 10% earnings per share growth, benefiting from international new unit development, disciplined cost management, modest same-store-sales growth and favorable foreign currency translation.
The company also forecasts continued substantial international new unit development of 1,400, including both YRI and China. Fiscal 2010 profit growth, excluding foreign currency translation, is expected to be 15% in mainland China, 10% in YRI and 5% in the U.S. Additionally, the company sees current foreign currency translation benefit of $25 million to $50 million in fiscal 2010.
For the recently closed third quarter, Yum! Brands reported 18% profit growth, helped by strong results in China and the U.S. The Louisville, Kentucky-based company reported net income of $334 million or $0.69 per share in the quarter, compared with $282 million or $0.58 per share last year. Adjusted earnings for the quarter were $0.70 per share. Third-quarter sales declined 2% to $2.4 billion, while franchise and license fees and income fell 3% to $346 million.
Among others in the sector, Miami, Florida-based Burger King Holdings Inc. (BKC) said in October that it expects the unpredictable consumer environment to persist in fiscal 2010. The company's recent first-quarter earnings of $46.6 million or $0.34 per share were lower than last year as revenues decreased 5%.
Another peer, McDonald's Corp. (MCD), which reported an increase in its third-quarter profit, citing positive comparable sales worldwide, expects that its focus on customer and commitment to financial discipline will continue to deliver long-term profitable growth for its system and shareholders.
YUM is trading at $32.52, down $1.61, on a volume of 4.29 million shares.
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