Second-quarter earnings for Yum! Brands
Yum! owns and operates fast-food and casual-dining stalwarts Taco Bell, KFC, and Pizza Hut. Thanks to the latter two, growth abroad is where we find the good news at Yum!. That's particularly true in China, where operating profit grew 25%, same-restaurant sales were up 18%, and 99 new restaurants opened. Less spectacular, but still notable, operating profit internationally (excluding China) grew 11%, same-restaurant sales were up 2%, and 142 new restaurants opened.
Posting strong numbers like these, Yum! is set to give peers like McDonald's
For the bad news, look no further than here at home, where Yum!'s operating profit was down 28% and same-restaurant sales were down 4%. In the U.S., as Taco Bell goes, so goes Yum! -- 60% of the company's domestic profit is brought in by the ubiquitous taco maker, which is trying to recover from a bout of bad publicity surrounding a lawsuit about the company's meat.
Which brings us to ...
In January, a California woman sued Taco Bell over the contents of its seasoned beef, claiming it was mainly meat filler. Mincing no words and sparing no bespoke-suited attorneys, Taco Bell responded quickly and aggressively by threatening a countersuit against the woman for "false statements."
She quietly and voluntarily dropped her claim shortly thereafter. Too late. The damage was done, and customers began staying away.
Yum! still a meal fit for a Fool
"It usually takes about six months to fully recover from food-related issues," said Yum! CEO David Novak on a recent conference call. The company expects Taco Bell's same-restaurant sales to still be in the negative come the third quarter, but better than the 5% decline reported for the second.
Here's the upshot of it all, fellow Fools: While Yum! Brands might continue to struggle for a while in the U.S., it will likely continue its relentless, chicken-frying, pizza-making, revenue-generating march across China, offering investors plenty of upside in the process.
Keep a peeled-eye on Yum! Brands. Add it to your watchlist.