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Yum Profit Tops Estimates, Helped by Cheap Chicken

Published on Oct 9 2014 9:48 AM in Food

Yum Profit Tops Estimates, Helped by Cheap Chicken

Yum! Brands Inc., owner of the KFC and Taco Bell fast-food chains, posted third-quarter profit that topped analysts’ estimates as relatively cheap chicken helped hold down costs.

Net income more than doubled to $404 million, or 89 cents a share, from $152 million, or 33 cents, a year earlier, the Louisville, Kentucky-based company said in a statement yesterday. Excluding some items, profit was 87 cents a share in the period, which ended 6 September. Analysts projected 83 cents.

Yum, which has more than 4,400 KFC fried-chicken restaurants in the US, is benefiting as the cost of poultry rises more slowly than the beef that many of its fast-food competitors rely upon. Prices for whole chickens sold by farmers in Georgia, the biggest producing state, have gained 9.1 percent this year, less than the 22 per cent increase for US wholesale beef prices. Yum’s food and paper costs in the quarter fell 4.5 per cent to $951 million.

“Their food and paper expense was essentially flat” as a percentage of sales, said Peter Saleh, a New York-based analyst at Telsey Advisory Group, who has a “market perform,” or hold, rating on the shares. “Chicken is not all that inflationary.”

Yum shares rose 1.4 per cent to $70.74 at the close in New York. The stock has slumped 6.4 per cent this year, while the Standard & Poor’s 500 Restaurants Index retreated 1.9 per cent.

Yum remains under pressure in China, where it has more than 6,400 restaurants, after a second food-safety scare drove customers away from its KFC and Pizza Hut chains. Same-store sales fell 14 per cent in China in the quarter. The company in September reported a preliminary decline of about 13 per cent after supplier OSI Group LLC was investigated for altering expiration dates on food.

Bloomberg News edited by HI

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