The stock price of Yum! Brands (NYSE:YUM), the owner of KFC, Pizza Hut, and Taco Bell restaurants, plummeted during the extended-trading hours after reporting its earnings for the third quarter that missed the expectation of Wall Street analysts.
The company’s stock was trading at $67.95 per share, down by 18.68% around 7:36 PM in New York.
Yum! Brands financial results
Yum! Brands reported that its earnings for the third quarter were $1.00 per share, below the $1.06 per share average estimate by analysts. The company said its worldwide system sales increased 6% and worldwide restaurant margin climbed 3.3 percentage points to 18.2%. Its worldwide effective tax rate was 24.8%.
The KFC Division system sales climbed 6%, the Pizza Hut Division system sales rose 2% and the Taco Bell Division system sales increased 7%. Its Indian Division system sales declined 9%.
In China, Yum! Brands achieved same-store sales growth of 2%, lower than the 9.6% same-store sales growth expected by analysts, according to Consensus Metrix. The company has been trying to recover from a food-safety investigation in China. It was also impacted by the country’s slowing economy.
In a statement, Yum! Brands CEP Greg Creed said, “The pace of recovery in our China division. Given our lower full-year expectations in China, combined with additional foreign exchange impact, we now expect 2015 EPS growth to be well below our target of at least 10%.”
The negative impact of foreign currency translation to its operating profit was $29 billion in the third quarter.
Yum! Brands taking significant steps to boost performance in China
Mr. Creed said the company’s China Division CEO Mickey Pant and his leadership team are “taking significant steps” to boost its sales, traffic, and profit to historic levels.
He added that growth fundamentals of Yum! Brands in China are still intact including its new-unit development.
The company expected its full-year same-store sales in China to be low-single digit negative, and mid-single-digit same-store sales growth in the fourth quarter. Yum Brands! expected a low-single digit EPS growth for the full-year.
“Our central goal remains building three iconic, global brands people trust and champion. We are focused on the three keys to driving shareholder value: new-unit development, same-store sales growth, and high returns on invested capital. I’m confident that this formula will produce strong, sustainable EPS growth over the long term,” said Mr. Creed. The company increased its quarterly dividend by 12%.