Yum Brands (NYSE:YUM) shares decline Wednesday, on reporting third-quarter revenue that fell short of analysts’ expectations, hurt by weak same-store sales growth at Pizza Hut.
But the earnings report from its operator in China on Tuesday evening was bleaker. Yum China CFO Andy Yeung said that sales had softened in late September through October, hurting its fourth-quarter results. China is KFC’s largest market and Pizza Hut’s second-largest.
Still, Yum CEO David Gibbs said in a statement that the company expects it will outperform its long-term growth algorithm of 5% unit growth, 7% system sales growth and 8% operating profit growth.
Yum’s stock fell more than 1% in premarket trading, while Yum China’s tumbled more than 14%.
Earnings per share proved to be $1.44 adjusted vs. $1.28 expected, on revenue of $1.71 billion vs. $1.77 billion expected
The restaurant company reported third-quarter net income of $416 million, or $1.46 per share, up from $331 million, or $1.14 per share, a year earlier. Yum said a fair value remeasurement of its investment in its Indian franchisee boosted earnings per share by five cents, while foreign currency weighed on its earnings per share by one cent.
Excluding refranchising losses, certain tax benefits and other items, Yum earned $1.44 per share.
Net sales rose 4% to $1.71 billion. The company set a new record for digital sales growth, Gibbs said.
Yum’s same-store sales grew 6% in the quarter, helped by strong sales at Taco Bell’s U.S. locations and KFC’s international restaurants.
YUM shares gave back 97 cents to $119.89.
