The Wall Street Journal-20080205-Earnings Digest- Higher Food Costs in U-S- Eat Into Yum Brands- Net
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Earnings Digest: Higher Food Costs in U.S. Eat Into Yum Brands' Net
Full Text (271 words)Yum Brands Inc. posted virtually flat fourth-quarter profit as rising food costs in the U.S. offset robust overseas sales.
The Louisville, Ky., operator of KFC, Pizza Hut and Taco Bell restaurants said nearly half of its full-year commodity-cost inflation of $44 million occurred in the fourth quarter.
U.S. same-store sales, or revenue at outlets open at least a year, rose 1%, driven by growth in its franchise business. Yum's U.S. restaurant margin fell to 12.1% from 13.5% because of the rising food costs.
Taco Bell same-store sales were flat in the fourth quarter, but it was an improvement from the three previous quarters, when same-store sales fell.
Yum has been reaping the benefits of strong overseas earnings, including those from mainland China.
Yum same-store sales there rose 17% in the quarter. Overall, international same-store sales rose 5% while system sales rose 16%.
Yum's results come as consumers, pummeled by a variety of economic issues, are grabbing fewer meals on the go and increasingly eating at home. Traffic at many chains, especially those in casual dining, continues to sag despite more "value" choices on menus.
Banc of America Securities said it sees sales for casual-dining companies remaining under pressure at least through the first half of the year as middle-income consumers continue to cut back spending.
For all of 2008, Yum raised its forecast to $1.85 a share, or at least 10% growth, from a previous outlook of $1.82 a share.
Shares of Yum, which reported earnings after the close of regular trading, were at $35 after hours, down from its 4 p.m. price of $35.81 on the New York Stock Exchange.
