LOS ANGELES – Yum Brands Inc. (YUM) on Thursday said U.S. same-store sales rose a less-than-expected 1 percent in November, but the company backed its 2004 profit forecast due to strong overseas sales and a lower tax rate.
Yum, parent of the KFC (search), Pizza Hut (search) and Taco Bell (search) fast-food chains, also forecast earnings for both the first quarter and full-year 2005 that were slightly below Wall Street analysts' average estimate, and said higher commodity costs would weigh on results in both the current and coming quarter.
Yum, whose shares were off 2 percent in early trading. backed its fourth-quarter profit outlook of 72 cents a share, which was in line with analysts' estimates, according to Reuters Estimates.
Strong international sales and a lower tax rate are expected to offset higher-than-expected produce and cheese costs as well as sales weakness in the United States, particularly at KFC, Yum said in a statement.
Sales at KFC restaurants open at least a year, or same-store sales, fell 7 percent in the four weeks ended Nov. 27. Analysts' estimates had ranged from a decline of 2 percent to a 1 percent rise.
Yum, which has been working to reverse lagging sales at KFC for more than a year, has said it expected same-store sales at the fried-chicken chain to rise 1 percent to 2 percent in the fourth quarter. Prudential Securities analyst Larry Miller, in a note to clients on Thursday, said meeting that goal was now "highly unlikely."
Same-store sales, a key retail measure, rose 5 percent at Taco Bell and climbed 3 percent at Pizza Hut in the period. International same-store sales rose 12 percent, or 8 percent before converting to U.S. dollars.
Louisville, Ky.-based Yum forecast 2004 earnings per share of $2.35 before one-time items, matching the Reuters Estimates forecast. Including a one-time gain, Yum expects 2004 EPS of $2.38.
For the first quarter of 2005, the company forecast profit of at least 49 cents a share, below analysts' average estimate of 51 cents a share.
The company expects earnings per share to grow 10 percent to at least $2.59 a share, before special items, in 2005. Analysts forecast $2.62 a share on average.
Yum forecast U.S. same-store sales growth at company restaurants to be up 1 percent to 2 percent next year and said it expects worldwide revenue growth of 5 percent to 6 percent.
Sales at its China unit are expected to rise 20 percent, and U.S. sales are forecast to be up 3 to 4 percent.
Yum shares were down 94 cents, or 2 percent, at $46.01 on the New York Stock Exchange (search). The stock hit a low of $45.72 earlier in the session