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By Jennifer Yousfi
Yum! Brands Inc. (YUM), owner of the familiar KFC, Taco Bell and Pizza Hut brands, announced flat fourth-quarter earnings, with strong international growth – particularly in China – offsetting weak domestic results.
"I am pleased to report that we ended our first decade as a public company in 2007 by once again demonstrating the underlying power of our global portfolio of leading restaurant brands," President and CEO David C. Novak said in a statement.
System-sales growth grew 42% in China and 16% for Yum! Restaurants International (YRI) in the fourth quarter. For the full-year, operating profit growth in China and YRI helped to offset a 3% decline in the United States.
In addition to its already strong overseas performance, favorable currency exchange rates due to the weak dollar helped to boost earnings per share (EPS) by another $.06.
"This marks the sixth straight year of delivering on our commitment of at least 10% annual EPS growth," he added.
The domestic market was the weak spot in an otherwise strong earnings report. The increase in same-store sales open a year was not enough to boost operating profit, down 1% from the prior year, due to higher commodity and labor costs.
"Clearly, our challenge in 2007 was our U.S. business," Novak told analysts on a conference, Reuters reported.
The Kentucky-based fast food company is not alone. Food prices have increased and consumer spending has decreased significantly in the past year, resulting in similarly weak domestic results for rival food chains McDonald’s Corp. (MCD) and Wendy’s International (WEN).
"In all candor, the best thing I can say about our weak U.S. performance in 2007 is that it sets us up for growth in 2008," Novak said.
Yum! raised its EPS forecast for full-year 2008 from $1.82 to $1.85 per share, or at least the pledged 10% growth that Novak has promised.
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