Yum Brands expects more profit, restaurants in 2011

Yum Brands expects more profit, restaurants in 2011

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Restaurant giant Yum! Brands Inc. reaffirmed its 2010 profit forecast Friday and said its expects 2011 earnings per share to grow by at least 10 percent more.

In a news release issued in advance of its annual investor update meeting, the company stood by its target of 14 percent EPS growth in 2010, excluding special items.

Its investor meeting will be held Wednesday, Dec. 8, in New York City.

“2010 has been a strong year led by our China business, and I’m pleased to report we remain on track to deliver 14 percent EPS growth,” David C. Novak, chairman and CEO of Louisville-based Yum (NYSE: YUM), said in the release.

“We take satisfaction that our EPS growth this year has been driven by strong operating profit growth, including expected gains in all of our business segments. Continued robust new unit development in China and Yum! Restaurants International (YRI) not only contributed to this year’s strong results, but sets the company up for growth in 2011,”

The release said Yum’s 2010 target is based on expectations such as increasing its operating profit in China by 15 percent, growth among its other international units of 10 percent and growth in its U.S. business.

Among the U.S. restaurants, Taco Bell is expected to post operating profit growth of 6 percent, including 3 percent same-store-sales growth, while the other U.S. units will post a combined 3 percent operating profit, the release said.

Key factors in its 2011 forecast include:

  • About 1,400 new international units, including 475 in China and 900 at YRI;
  • New incremental taxes applied to sales in China will reduce operating profit by about $25 million;
  • A benefit of at least $20 million from China currency translation;
  • benefit of about $20 million from YRI foreign currency translation;
  • Global capital expenditures of about $900 million;
  • U.S. re-franchising of about 500 units, with $150 million in proceeds;
  • Interest expense expected to decrease by at least $10 million.

The release also noted that 2011 will include a 53rd week of sales for U.S. businesses and a portion of the YRI business. Any benefit from the extra week of sales will be used to invest in “strategic growth initiatives,” the release said.

Louisville-based Yum Brands is the parent company of Irvine’s Taco Bell Corp., as well as KFC, Pizza Hut, Long John Silver’s and A&W Restaurants. Combined, the brands have more than 37,000 restaurants in more than 110 countries and territories.

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