Restaurant operator Yum! Brands Inc. (YUM) said Tuesday after the markets closed that its third quarter profit more than doubled from last year, when results were weighed down by a hefty impairment charge related to Little Sheep.
However, the company's quarterly earnings per share, excluding items, came in below analysts' expectations as did its quarterly revenue.
At the same time, the company lowered its full year earnings per share growth forecast, citing soft sales in China due to a recent supplier incident.
David Novak, Yum! Brands Chairman and CEO said, "I'm absolutely confident in Yum! Brands' ability to deliver strong, sustainable growth in the years ahead despite the recent supplier incident in China, which has significantly impacted China sales, leading us to reduce our full-year EPS outlook."
Yum! Brands shares are currently gaining 0.39% in after hours trading after closing the day's regular trading session at $69.73, down $1.65 or 2.31%. The shares trade in a 52-week range of $64.08 to $83.58.
Effective January 1, 2014, the company combined its Yum! Restaurants International and U.S. divisions into three global brand divisions: KFC, Pizza Hut and Taco Bell. China and India remains separate divisions given their strategic importance and enormous growth potential.
Total revenue for the company's all-important China division declined 10% to $1.84 billion in the third quarter, while same-store sales fell 14%, including declines of 14% at KFC and 11% at Pizza Hut Casual Dining. The division's operating profit dropped 40% from last year to $202 million.
The China Division opened 125 new units in the third quarter.
Yum! Brands disclosed in late July that there was a significant, negative impact to same-store sales at both KFC and Pizza Hut in China due to improper food handling practices by supplier Shanghai Husi, which has shaken consumer confidence. The company has since terminated its relationship with the supplier.
Yum! Brands said Tuesday that while sales in China are rebounding, they continue to be negative.
Third quarter revenue for the company's KFC division increased 10% to $771 million, while the division's operating profit increased 16% to $169 million.
Pizza Hut division's third quarter revenue remained flat with last year to $264 million, while the division's operating profit fell 2% to $68 million.
Third quarter revenue from the company's Taco Bell division grew 1% to $443 million, while the division's operating profit rose 14% to $124 million.
For the third quarter ended September 6, 2014, the Louisville, Kentucky-based company reported net income of $404 million or $0.89 per share, compared to $152 million or $0.33 per share for the year-ago quarter.
The year-ago quarter results included an impairment charge related to Little Sheep totaling $258 million.
Excluding items, adjusted earnings for the third quarter were $0.87 per share, compared to $0.85 per share in the prior year quarter.
On average, 21 analysts polled by Thomson Reuters expected the company to earn $0.89 per share for the third quarter. Analysts' estimates typically exclude special items.
Total revenue for the third quarter fell 3% to $3.35 billion from $3.47 billion in the same quarter last year. Seventeen analysts had a consensus revenue estimate of $3.48 billion for the third quarter.
With the assumption that China same-store sales continue to improve, but are negative for the fourth-quarter, the company said it now estimates 2014 earnings per share growth to be between 6% and 10%, excluding special items. Previously, the company expected full-year EPS growth of at least 20%. Analysts currently expect the company to report full year EPS growth of 14.8%.
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