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International sales drive Yum's earnings

July 12, 2007|From the Associated Press

LOUISVILLE, KY. — Fast-food giant Yum Brands Inc. said Wednesday that its fiscal second-quarter profit rose 12%, beating Wall Street projections, on the strength of sizzling international sales that offset an essentially flat U.S. performance.

The owner of KFC, Pizza Hut and Irvine-based Taco Bell reported double-digit operating profit growth in its China and international divisions. Based on its strong overseas performance, Yum raised its full-year forecast for growth in earnings per share to 12% from 11%.

In the U.S., Taco Bell had another sluggish performance, although it was better than the previous quarter as the chain rebounded from two setbacks: an E. coli outbreak at some of its East Coast restaurants last year and a rat infestation in a franchise KFC-Taco Bell outlet in New York in February. Yum predicted steady improvement for the chain in coming months.

For the three months ended June 16, Yum posted net income of $214 million, or 39 cents a share, compared with $192 million, or 34 cents, a year earlier. Revenue grew 9% to $2.37 billion from $2.18 billion.

U.S. same-store sales, or sales at stores open at least a year, dropped 3% at company-owned restaurants, primarily because of a 7% decline at Taco Bell, Yum said. That was an improvement from the first quarter, when same-store sales fell 11% at company-owned Taco Bells.

Yum spokesman Jonathan Blum said the company expected stronger U.S. sales at its chains in the second half of the year, including at Taco Bell: "The Taco Bell business is improving slowly. It's steady improvement, and we expect to see even more improvement in the second half."

For the first six months of the year, Yum's profit rose 13% to $408 million from $362 million in the same period last year.

The company's brands also include Long John Silver's and A&W restaurants.

Shares of Yum rose $1.46 to $34.41. The results were released after the close of trading.

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