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Yum's China rebound dimmed by India, Pizza Hut weakness

By Lisa Baertlein

(Reuters) - Yum Brands Inc on Wednesday said its KFC business bounced back in China, its No. 1 market, but its stock fell more than 2 percent in extended-hours trading on disappointing quarterly results from its India, Taco Bell and Pizza Hut divisions.

Yum's sales at established restaurants in China increased 15 percent in the second quarter, including a 21 percent jump at KFC and flat results at Pizza Hut Casual Dining.

Analysts polled by Consensus Metrix had forecast that Yum's China sales would climb 11.4 percent.

An avian flu outbreak and a food-safety scare last year battered Yum's restaurant results in China, which contributes more than half of the company's overall sales. Yum's China division same-restaurant sales tumbled 20 percent in the second quarter last year.

Yum recently revamped its KFC China product lineup to attract more diners. Yum's China Division, which had 6,387 mostly KFC restaurants at the end of the second quarter, contributed 35 percent of the company's total operating profit last year.

The India division's same-restaurant sales fell 2 percent, versus the 1.6 percent gain that analysts expected.

Yum has been in India for more than a decade. It had 714 total units in the country at the end of the second quarter, including KFC, Pizza Hut and Taco Bell restaurants.

India is a competitive environment and Yum is "investing aggressively" in that market, spokesman Jonathan Blum told Reuters.

Same-restaurant sales were up 2 percent for Taco Bell and down 3 percent for Pizza Hut. Analysts polled by Consensus Metrix expected a 3.6 percent gain for Taco Bell and a 0.1 percent rise for Pizza Hut.

Chief Executive Officer David Novak said the company was pleased with initial results from Taco Bell's breakfast launch in the United States, adding that it was working to improve results at Pizza Hut.

"We are taking significant actions in our U.S. (Pizza Hut) business to reignite sales and expect to make substantial progress" for the rest of the year, Novak said in a statement.Louisville, Kentucky-based Yum also reported net income of $334 million, or 73 cents per share, for the second quarter that ended June 14, compared with $281 million, or 61 cents per share, a year earlier.

The company, which will hold a conference call with financial analysts on Thursday morning, said it is on its way to hitting its forecast of full-year earnings-per-share growth of at least 20 percent.

Yum's stock fell 2.3 percent to $80.81 in after-hours trading, but it remains near its 52-week high.

(Reporting by Lisa Baertlein in Los Angeles; Editing by Jan Paschal and Chris Reese)

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