Yum reports 10 percent growth in 2Q earnings

LOUISVILLE, Ky. — Yum Brands Inc., owner of the Pizza Hut, Taco Bell and KFC fast-food chains, said Wednesday that strong sales overseas served up 10 percent growth in its second-quarter profit, even though its U.S. business continued to struggle.

Yum's sales in China rose fast, and its profit there soared. But the company reported across-the-board declines in the U.S., including a 5 percent drop in revenue at Taco Bell restaurants open at least a year.

That chain, which accounts for about 60 percent of Yum's U.S. profit, is struggling to overcome publicity from a dropped lawsuit that claimed the filling in its tacos and burritos didn't contain enough beef to be called that.

Taco Bell called the accusations false and fought back with hard-hitting marketing on television and in newspapers.

But revenue at KFC restaurants in the U.S. open at least a year also fell 5 percent, and Pizza Hut had a 2 percent decline. Company officials said earlier this year they expected the second quarter to be the year's low point in the U.S.

On Wednesday, Yum said it expects things to get better in the U.S. by the fourth quarter, which begins in September.

It also raised its earnings forecast for the full year. Yum now expects to report a 12 percent or greater increase in earnings per share, excluding one-time items. The company previously said it expected at least 10 percent growth.

Louisville-based Yum said it earned $316 million, or 65 cents per share, for the quarter that ended June 11, up from $286 million, or 59 cents per share, a year earlier. Its revenue rose 9 percent to $2.8 billion.

Analysts expected adjusted earnings of 61 cents per share and revenue of $2.7 billion in the quarter.

Operating profit in Yum's key China operations rose by a whopping 25 percent, adjusted for currency fluctuations. The company's operating profit dropped 28 percent in the U.S.

Yum opened 99 restaurants during the quarter in China, where KFC has become a leading fast-food brand. Sales at KFC stores open at least a year in China rose 17 percent.

In Yum's international division, which excludes China, operating profit rose 11 percent, adjusted for currency fluctuations. The company opened 142 new restaurants in 37 countries during the quarter.

For that unit, growth in Thailand and other emerging markets, as well as in France, offset a weak performance by Pizza Hut in the United Kingdom.

Yum operates nearly 38,000 restaurants in more than 110 countries and territories.

The company also owns the Long John Silver's and A&W restaurant chains, both of which are up for sale.

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