Yum! Brands continues profit from China expansion, hopes grilled chicken will boost KFC

Posted by Isobel Drake on 5th February 2009

Yum! Brands, the owner of the KFC and Pizza Hut brands, has reported global system-sales growth of 7%, excluding foreign currency translation, driven by record international development of 1,495 new units. Operating profit growth rose 8%, with strong international growth offsetting weakness in the US market.

David C. Novak, Chairman and CEO, noted that the results had exceeded their annual target but remained cautious about the future. “These results for 2008 again exceeded our annual target for at least 10% EPS growth and represent our seventh straight year of at least 13% growth. Our China and YRI Divisions, which now account for 60% of operating profit, are a major factor in driving this consistency of performance,” he said.

“As we go into 2009 we continue to target at least 10% growth in EPS, while recognising that in particular the U.S. consumer is under extreme financial pressure, making sales growth more difficult to achieve than in recent times. This is particularly evident for the higher guest check dinner occasion. Nevertheless, we remain confident that the power of our global portfolio will enable us to once again perform relatively well in what promises to be a challenging environment.”

Mr Novak advised that new initiatives had helped drive sales last year and expected a number of product additions in the coming year to help boost demand. “In 2008, this included successful launches of the Tuscani pasta line at Pizza Hut, and the “Why Pay More?” menu and Frutista Freeze line of beverages at Taco Bell,” he noted. “For 2009, we will continue to build on these successful new sales layers with product additions, as well as create new sales layers such as Kentucky Grilled Chicken at KFC.”

KFC has not been performing as well as the company would like in the US, but they believe that the pending introduction of a value menu and the launch of Kentucky Grilled Chicken in the second quarter would boost its fortunes.

In Australia and New Zealand, the company saw system-sales growth rise 6% for the final quarter and 5% for the year, excluding the currency impact. Net unit growth fell 1%, however.