KFC Parent's Earnings Up Despite China Problems

KFC, Taco Bell (search) and Pizza Hut parent Yum Brands Inc. (YUM) Wednesday posted higher quarterly earnings and backed its outlook for the year despite a supply-chain issue in China that is hurting profits in that market.

Net income for the first quarter rose to $161 million, or 53 cents per share, from $142 million, or 47 cents per share, a year ago.

Wall Street analysts, on average, had expected earnings of 52 cents per share, according to Reuters Estimates.

Yum, which also owns the A&W (search) and Long John Silver's (search) fast-food chains, affirmed its second-quarter earnings forecast of 56 cents a share, a penny below Wall Street's average estimate of 57 cents a share, according to Reuters Estimates.

For the full year, Yum expects to earn at least $2.60 a share. Analysts had been expecting earnings of about $2.63 a share.

Yum's rapidly-growing business in China, which has been a major driver of the company's earnings increases in recent years, is expected to post a decline in operating profit in the second quarter, the company said.

It cited a "supplier ingredient issue" last month that hurt sales at its KFC (search) restaurants in mainland China.

The impact is expected to be short-term and sales are expected to recover later in the second quarter or in the following quarter. Sales at Yum's Chinese restaurants open at least a year, or same-store sales, are expected to drop 5 percent in April.

The division's operating profit is forecast to be between $20 million and $25 million below the company's previous estimates.