With more than 33,000 restaurants worldwide, Yum! Brands has announced a 13% increase in its third quarter earnings over the same period last year. Though US growth is slowing slightly, Yum! is compensating by focusing increasing attention on its overseas outlets. As Yum! Brands looks to broaden its horizons, the sky may well be the limit.
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Fastfood restaurant corporation Yum! Brands, which owns Taco Bell, Pizza Hut, and KFC, recently announced Q3 2004 earnings of US$185m – a 13% increase from 3Q 2003 earnings of $164m. Worldwide system-sales growth is expected to top 7% for its fiscal year, capping off four quarters of strong growth.
Strong overseas success, particularly in the UK and China, is making up for slower growth in the US. Sales in international outlets climbed 17%, 11% before currency conversion, in the 12 month period; corresponding US sales grew only 5% during the same time. While system-wide sales in US outlets increased 4% over the third quarter, China’s sales skyrocketed 35% in local currency terms.
The company has responded to the sluggish US conditions by stepping up its efforts for overseas expansion. During the past year, restaurant counts increased 27% in China, 7% in the UK, and 6% in Mexico, while declining 1% in the US. Yum! plans to open 1,000 new overseas restaurants next year.
Overseas gains are also helping the struggling KFC chain. In the US, KFC saw same-store sales for September drop 1%, and third-quarter same-store sales climb only 2% after two consecutive quarters of negative growth. The chain has, however, experienced explosive growth in the Chinese market.
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By GlobalDataWhile all fastfood chains’ US profits have been hit hard by rising commodity costs, Yum! Brands is making a wise decision to focus much of its attention on strong overseas growth, where such costs are having less of an impact. The relatively weak dollar has helped improve sales overseas as well, driving up sales figures once they have been converted into US currency. In addition, the potential customer base overseas far exceeds that of the US. China alone, for instance, has a population of 1 billion citizens – leaving Yum! more room to grow. Indeed, as overseas ventures go, Yum! is clearly on a roll.
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