The Motley Fool Previous Page

Yum! Restaurants International and India Will Save the Day

Michael Lewis
October 10, 2013

Yum! Brands (NYSE: YUM) delivered some dismal earnings on Tuesday along with downbeat guidance. The company's most important market, China, continued to suffer from a poultry-supply issue that has lingered since last December. With same-store sales down in the region and flat in the United States, the market is finding plenty of reasons to send the stock down. But not all is fowl with the parent company behind KFC, Pizza Hut, and Taco Bell. One area of Yum!'s business continues to thrive and grow well into the double digits. It may not be the company's most important segment today, but it very well could be in the near future. Here's why Yum!'s earnings weren't so bad.

A bad time
Sure, same-store sales at KFC in China dropped 14% and the company doesn't expect the fourth quarter to be much better. And, OK, the U.S. market isn't too strong at the moment, either, with flat sales overall, despite a healthy 4% uptick at Taco Bell. In the past decade, buying Yum! stock wasn't about the U.S., it was about Chinese and emerging-market expansion. The company already experienced its meteoric rise from the China expansion -- and management mentioned it was opening an impressive 700 more stores throughout the year -- but it's the latter that holds future growth.

Even during Yum!'s dismal third quarter, India market sales grew 24%, while International emerging markets grew 11%. Yum! Restaurants International and India will have record new-store openings this year -- more than 1,000. The storesĀ are largely franchised in these regions, which include