Restaurant operator Yum! Brands Inc. (YUM) said Tuesday after the markets closed that its first quarter profit fell 26% from last year, as its business in China was significantly impacted by adverse publicity from the poultry supply situation that occurred in late December.
However, the company said it continues to expect full year 2013 adjusted earnings per share to decline in mid-single digit percentage as compared to full year 2012.
David Novak, Chairman and CEO, said, "While better than expected, the first quarter was extremely difficult for Yum! Brands. As anticipated, intense media attention surrounding poultry supply in China significantly impacted KFC sales and profit."
Yum! Brands shares are currently gaining 5.22% in after hours trading after closing the day's regular trading session at $64.15, down $1.11 or 1.70%. The shares trade in a 52-week range of $59.68 to $74.75.
The parent company of Taco Bell, KFC and Pizza Hut has been battling adverse publicity surrounding an investigation by the Shanghai FDA into poultry supply management at Yum! China.
Total revenue for the company's all-important China division fell 5% to $1.15 billion in the first quarter, while same-store sales declined 20%, including a 24% decline at KFC and 2% decline at Pizza Hut. The division's operating profit dropped 40% from last year to $154 million.
The company said the negative media publicity surrounding poultry supply in China has subsided, and it is now in the midst of an aggressive quality assurance marketing campaign. However, the company's sales recovery has been adversely affected by the recent news of Avian flu.
Starting the first week of April, publicity surrounding Avian flu in China has had a significant, negative impact on KFC sales, the company said. Based on results through the first three weeks of April, the company expects China Division same-store sales to decline about 30% for the month.
First quarter revenue for Yum! Restaurants International division fell 6% to $669 million, while division's same-store sales for the quarter grew 1%. The division's operating profit rose 19% to $199 million.
Total revenue for the company's U.S. division fell 13% to $695 million in the first quarter, while same-store sales increased 2%, driven by growth of 6% at Taco Bell, partially offset by decline of 1% at Pizza Hut and 1% at KFC.
For the first quarter ended March 23, 2013, the Louisville, Kentucky-based company reported net income of $337 million or $0.72 per share, compared to $458 million or $0.96 per share for the year-ago quarter.
Excluding special items, earnings for the first quarter were $0.70 per share, compared to $0.76 per share in the prior year quarter.
Total revenue for the first quarter fell 8% to $2.54 billion from $2.74 billion in the same quarter last year.
Worldwide restaurant margin declined 2.7 percentage points to 15.9% in the first quarter, including a decline of 7.0 percentage points in China. Restaurant margin increased 1.4 percentage points at YRI and 2.4 percentage points in the U.S.
Through April 22, the company repurchased 1.7 million shares at an average price of $65 totaling $112 million.
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