Yum! Brands Results

Yum! Brands Reports Solid Fourth-Quarter Results and Completion of Strategic Transformation

System Sales Growth of 10%; Same-Store Sales Growth of 2%; GAAP Operating Profit Decline of (26)%; Core Operating Profit Growth of 14%

Yum! Brands

Yum! Brands, Inc. (NYSE: YUM) today reported results for the fourth-quarter and year ended December 31, 2019. Fourth-quarter GAAP EPS was $1.58, an increase of 51%. Full-year GAAP EPS was $4.14, a decrease of (12)%. Fourth-quarter EPS excluding Special Items was $1.00, an increase of 148%. Full-year EPS excluding Special Items was $3.55, an increase of 12%.

DAVID GIBBS & CHRIS TURNER COMMENTS

David Gibbs, CEO, said “I am proud to announce that we completed our three-year transformation of Yum!, having achieved all of our transformation goals and evolved into a more focused, more franchised and more efficient business. 2019 was a truly historic year for our company. For the full-year, we generated over $50 billion in system sales and ended the year with over 50,000 restaurants thanks to our world-class franchisees. We delivered results consistent with our long-term growth algorithm with same-store sales growth of 3% and net-new unit growth of 4%. We began 2020 by announcing an agreement to add the Habit Burger Grill to the Yum! family. When complete, this deal should enable us to offer an exciting new investment opportunity to our existing franchisees and expand an award-winning, trend-forward brand through the power of Yum!’s unmatched scale. As we move into the next phase of growth for Yum!, we will continue to focus on our four key growth drivers with a collaborative mindset to fuel strong results for years to come.”

Chris Turner, CFO, continued “Fourth-quarter results were a solid end to the year where we met or exceeded each component of our guidance, including full-year 2019 core operating profit growth, which was an increase of 12%, or 11% excluding the 53rd week. I'm especially pleased that we opened over 1,000 net new units in the fourth-quarter alone. We’ve emerged from our transformation a stronger company, and I look forward to accelerating the growth of our iconic brands, championing the customer experience and unlocking further value for our stakeholders.”

SUMMARY FINANCIAL TABLE

 

Fourth-Quarter

Full-Year

 

2019

2018

% Change

2019

2018

% Change

GAAP EPS

$1.58

 

$1.04

 

+51

 

$4.14

 

$4.69

 

(12)

Special Items EPS1

$0.58

 

$0.64

 

NM

 

$0.59

 

$1.52

 

NM

EPS Excluding Special Items

$1.00

 

$0.40

 

+148

 

$3.55

 

$3.17

 

+12

1See Reconciliation of Non-GAAP Measurements to GAAP Results within this release for further detail of Special Items.

All comparisons are versus the same period a year ago.

System sales growth figures exclude foreign currency translation ("F/X") and core operating profit growth figures exclude F/X and Special Items. Special Items are not allocated to any segment and therefore only impact worldwide GAAP results.

Unless otherwise noted, all results include a 53rd week in 2019.

See reconciliation of Non-GAAP Measurements to GAAP Results within this release for further details.

FOURTH-QUARTER HIGHLIGHTS

?

 

Worldwide system sales excluding foreign currency translation grew 10%, with Taco Bell at 13%, KFC at 11% and Pizza Hut at 7%.

?

 

We opened 1,029 net units for 4% net unit growth.

?

 

We repurchased 3.2 million shares totaling $333 million at an average price per share of $103.

?

 

We recorded $21 million of pre-tax investment expense related to the change in fair value of our investment in Grubhub, which resulted in a negative ($0.05) impact to EPS on the quarter.

?

 

Foreign currency translation unfavorably impacted divisional operating profit by $3 million.

 

% Change

 

System Sales

Ex F/X

Same-Store Sales

Net New Units

GAAP

Operating Profit

Core

Operating Profit

KFC Division

+11

 

+3

 

+7

 

+11

 

+12

Pizza Hut Division1

+7

 

(2)

 

+1

 

(1)

 

(1)

Taco Bell Division

+13

 

+4

 

+4

 

+18

 

+18

Worldwide1

+10

 

+2

 

+4

 

(26)

 

+14

 

Results Excluding 53rd Week % Change

 

System Sales

Ex F/X

Core

Operating Profit

KFC Division

+8

 

+9

Pizza Hut Division1

+4

 

(4)

Taco Bell Division

+7

 

+11

Worldwide1

+7

 

+9

FULL-YEAR HIGHLIGHTS

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Worldwide system sales excluding foreign currency translation grew 9%, with KFC at 10%, Taco Bell at 9% and Pizza Hut at 8%.

?

 

We opened 2,040 net units for 4% net unit growth.

?

 

We repurchased 7.8 million shares totaling $810 million at an average price per share of $104.

?

 

We recorded $77 million of pre-tax investment expense related to the change in fair value of our investment in Grubhub, which resulted in a negative ($0.19) impact to EPS on the year.

?

 

Foreign currency translation unfavorably impacted divisional operating profit by $46 million.

 

% Change

 

System Sales

Ex F/X

Same-Store Sales

Net New Units

GAAP

Operating Profit

Core

Operating Profit

KFC Division

+10

 

+4

 

+7

 

+10

 

+14

Pizza Hut Division

+8

 

Even

 

+1

 

+6

 

+8

Taco Bell Division

+9

 

+5

 

+4

 

+8

 

+8

Worldwide1

+9

 

+3

 

+4

 

(16)

 

+12

 

Results Excluding 53rd Week % Change

 

System Sales

Ex F/X

Core

Operating Profit

KFC Division

+9

 

+13

Pizza Hut Division1

+7

 

+7

Taco Bell Division

+8

 

+6

Worldwide1

+8

 

+11

1Pizza Hut Division and Worldwide system sales include the benefit of the increase in units at the end of the fourth-quarter 2018 related to our strategic alliance with Telepizza. Same-store sales and net-new unit growth reflects the inclusion of Telepizza in the prior year base.

 KFC DIVISION

 

Fourth-Quarter

Full-Year

 

 

 

 

%/ppts Change

 

 

%/ppts Change

 

2019

2018

Reported

Ex F/X

2019

2018

Reported

Ex F/X

Restaurants

 

24,104

 

22,621

 

+7

 

NA

 

24,104

 

22,621

 

+7

 

NA

System Sales ($MM)

 

7,737

 

7,049

 

+10

 

+11

 

27,900

 

26,239

 

+6

 

+10

Same-Store Sales Growth (%)

 

+3

 

+3

 

NM

 

NM

 

+4

 

+2

 

NM

 

NM

Franchise & Property Revenues ($MM)

 

391

 

357

 

+9

 

+10

 

1,390

 

1,294

 

+7

 

+11

Operating Profit ($MM)

 

285

 

255

 

+11

 

+12

 

1,052

 

959

 

+10

 

+14

Operating Margin (%)

 

39.0

 

37.2

 

1.8

 

1.8

 

42.2

 

36.3

 

5.9

 

5.8

 

Fourth Quarter (% Change)

Year-to-Date (% Change)

 

International

U.S.

International

U.S.

System Sales Growth Ex F/X

+12

+6

+11

+3

Same-Store Sales Growth

+4

+1

+5

+1

?

 

KFC Division opened 814 gross new restaurants during the quarter.

 

 

? For the year, KFC Division opened 1,928 gross new restaurants in 99 countries.

?

 

Operating margin increased 1.8 percentage points for the quarter and 5.9 percentage points for the year driven by refranchising, same-store sales growth and net new unit growth, offset by higher G&A.

?

 

The 53rd week provided a benefit of 3 percentage points to both system sales growth and core operating profit growth for the quarter. For the year, the 53rd week provided a benefit of 1 percentage point to both system sales growth and core operating profit growth.

?

 

Foreign currency translation unfavorably impacted operating profit by $3 million for the quarter and $39 for the year.

KFC Markets1

Percent of KFC

System Sales2

System Sales Growth Ex F/X

Fourth-Quarter

(% Change)

Year-to-Date

(% Change)

China

27%

+10

+11

United States

16%

+6

+3

Asia

12%

+8

+8

Russia, Central & Eastern Europe

8%

+19

+19

Australia

7%

+15

+10

United Kingdom

6%

+11

+13

Western Europe

6%

+15

+13

Latin America

5%

+11

+12

Africa

4%

+14

+12

Middle East / Turkey / North Africa

4%

+13

+9

Canada

2%

+6

+1

Thailand

2%

(1)

+4

India

1%

+23

+22

1Refer to investors.yum.com under Financial Reports for a list of the countries within each of the markets.

2Reflects Full Year 2019.

PIZZA HUT DIVISION

 

Fourth-Quarter

Full-Year

 

 

 

 

%/ppts Change

 

 

%/ppts Change

 

2019

2018

Reported

Ex F/X

2019

2018

Reported

Ex F/X

Restaurants

 

18,703

 

18,431

 

+1

 

NA

 

18,703

 

18,431

 

+1

 

NA

System Sales ($MM)1

 

3,579

 

3,357

 

+7

 

+7

 

12,900

 

12,212

 

+6

 

+8

Same-Store Sales Growth (%)1

 

(2)

 

Even

 

NM

 

NM

 

Even

 

Even

 

NM

 

NM

Franchise & Property Revenues ($MM)

 

166

 

166

 

Even

 

+1

 

597

 

598

 

Even

 

+1

Operating Profit ($MM)

 

90

 

91

 

(1)

 

(1)

 

369

 

348

 

+6

 

+8

Operating Margin (%)

 

30.2

 

33.1

 

(2.9)

 

(2.8)

 

35.9

 

35.3

 

0.6

 

0.9

 

Fourth Quarter (% Change)

Year-to-Date (% Change)

 

International

U.S.

International

U.S.

System Sales Growth Ex F/X1

+13

+1

+14

+1

Same-Store Sales Growth1

Even

(4)

+1

(1)

?

 

Pizza Hut Division opened 431 gross new restaurants during the quarter.

 

 

? For the year, Pizza Hut Division opened 1,029 gross new restaurants in 73 countries.

?

 

Operating margin decreased 2.9 percentage points for the quarter driven by higher G&A and higher provisions for past due receivables, partially offset by lower advertising spend. For the year, operating margin increased 0.6 percentage points driven by refranchising and lower advertising spend, partially offset by higher provisions for past due receivables.

?

 

The 53rd week provided a benefit of 3 percentage points to both system sales growth and core operating profit growth for the quarter. For the year, the 53rd week provided a benefit of 1 percentage point to both system sales growth and core operating profit growth.

?

 

Foreign currency translation had no impact on operating profit for the quarter and unfavorably impacted operating profit by $7 million for the year.

Pizza Hut Markets2

Percent of Pizza Hut

System Sales3

System Sales Growth Ex F/X

Fourth-Quarter

(% Change)

Year-to-Date

(% Change)

United States

42%

+1

+1

China

17%

+1

+3

Asia

13%

+4

+4

Latin America / Spain / Portugal

11%

+79

+84

Europe (excluding Spain & Portugal)

9%

+3

+4

Middle East / Turkey / North Africa

4%

+5

+6

Canada

2%

+10

+6

India

1%

+8

+8

Africa

<1%

+15

+26

1Pizza Hut Division and Worldwide system sales include the benefit of the increase in units at the end of the fourth-quarter 2018 related to our strategic alliance with Telepizza. Same-store sales and net-new unit growth reflects the inclusion of Telepizza in the prior year base.

2Refer to investors.yum.com under Financial Reports for a list of the countries within each of the markets.

3Reflects Full Year 2019. Europe and Latin America system sales reflects the transfer of reporting responsibility of Spain and Portugal Pizza Hut units from Europe to Latin America as a result of the Telepizza alliance.

TACO BELL DIVISION

 

Fourth-Quarter

Full-Year

 

 

 

 

 

 

%/ppts Change

 

 

 

 

 

%/ppts Change

 

2019

 

2018

 

Reported

 

Ex F/X

2019

 

2018

 

Reported

 

Ex F/X

Restaurants

 

7,363

 

7,072

 

+4

 

NA

 

7,363

 

7,072

 

+4

 

NA

System Sales ($MM)

 

3,779

 

3,346

 

+13

 

+13

 

11,784

 

10,786

 

+9

 

+9

Same-Store Sales Growth (%)

 

+4

 

+6

 

NM

 

NM

 

+5

 

+4

 

NM

 

NM

Franchise & Property Revenues ($MM)

 

213

 

186

 

+14

 

+14

 

673

 

590

 

+14

 

+14

Operating Profit ($MM)

 

225

 

191

 

+18

 

+18

 

683

 

633

 

+8

 

+8

Operating Margin (%)

 

33.7

 

31.9

 

1.8

 

1.8

 

32.8

 

30.8

 

2.0

 

2.0

?

 

Taco Bell Division opened 191 gross new restaurants during the quarter.

 

 

? For the year, Taco Bell Division opened 375 gross new restaurants in 22 countries.

?

 

The 53rd week provided a benefit of 6 percentage points to system sales growth and 7 percentage points to core operating profit growth for the quarter. For the year, the 53rd week provided a benefit of 1 percentage point to system sales growth and 2 percentage points to core operating profit growth.

?

 

Operating margin increased 1.8 percentage points for the quarter and 2.0 percentage points for the year driven by same-store sales growth and refranchising, partially offset by higher restaurant level costs.

OTHER ITEMS

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Disclosures pertaining to outstanding debt in our Restricted Group capital structure will be provided at the time of the filing of the 2019 Form 10-K.

?

 

On January 6, 2020, we announced our definitive agreement pursuant to which Yum! Brands will acquire all of the issued and outstanding common shares of The Habit Burger Grill for $14 per share in cash or a total of approximately $375 million. The transaction is subject to approval by The Habit Burger Grill’s stockholders and other customary closing conditions. The transaction is expected to be completed by the end of the second-quarter of 2020.

Yum! Brands, Inc., based in Louisville, Kentucky, has over 50,000 restaurants in more than 150 countries and territories primarily operating the company’s brands -- KFC, Pizza Hut and Taco Bell -- global leaders of the chicken, pizza and Mexican-style food categories. Worldwide, the Yum! Brands system opens over nine new restaurants per day on average, making it a leader in global retail development.



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