Yum! Brands builds on China presence

The Big Three fast food giants have had a tough year battling first inflation which forced them to raise prices and now dropping them as customers retrench.

Yum! Brands (NYSE: YUM), which owns Kentucky Fried Chicken (KFC) has been the the performance leader for most of the year with its shares up 2.4% at the time of writing. It is moving ahead with big expansion plans in emerging markets particularly China.

In this respect it is keeping pace with McDonald’s and Restaurant Brands International, which owns Tim Hortons. They also have big plans in Asia.

Here’s an update:

Yum! Brands Inc. (NYSE: YUM)  Recent close $130.37. (All figures in US dollars.) 

Background: Yum! Brands is the holding company that owns Taco Bell, Kentucky Fried Chicken (KFC), and Pizza Hut. It is the second largest global fast-food chain and is about half as big as McDonald’s by revenue. It has 57,000 restaurants in 290 countries with almost half of its revenue coming from the US. China is its second biggest market.

Performance: YUM!’s shares are up 2.4% year-to-date at the time of writing and are 7% higher in the last 12 months.

Recent developments: Yum’s second quarter topped revenue estimates, but earnings fell short. Revenue rose 4.5% to $1.76 billion. Earnings per share of $1.35 was 4% lower than last year.

Yum opened 894 new outlets in the quarter with expansion focused on China, India, and Africa where it partners with a local master franchisor to help develop the market. It wants 20,000 stores in China by 2026. It currently has 10,000 KFCs and 350 Pizza Huts. It is also developing a chain of Lavazza coffee stores to capture growth in that niche.

In India, where it has 395 KFC stores and 195 Pizza Huts, it is adapting menus to local tastes, including more vegetarian options and chicken sandwiches using local seasonings and spices.

Dividend: Yum’s has increased its dividend in each of the last 7 years. The last increase was in January to $0.67 quarterly. It yields 2.04% at current prices.

This article appeared in a recent issue of the Internet Wealth Builder.  For information on how to reprint this article please view this page.