Earnings Preview: KFC parent Yum to report 1Q

Yum's 1st-quarter results to provide snapshot of KFC progress in China

Associated Press

NEW YORK (AP) -- Yum Brands Inc. reports its first-quarter results Tuesday, which give a closer look at how the parent company of KFC, Pizza Hut and Taco Bell is progressing in its efforts to recover from a controversy over its chicken suppliers in China.

WHAT TO WATCH FOR: The Louisville, Ky.-based company has been reeling since a TV report late last year said some its suppliers were giving chickens unapproved levels of antibiotics. Since then, Yum has been working to rebuild trust with customers and has promised to keep investors updated with monthly sales figures for the region.

Complicating matters in the current quarter, the company noted earlier this month that publicity surrounding a new strain of bird flu in China is also having a "significant, negative impact" on KFC sales for April.

WHY IT MATTERS: Globally, Yum has more than 39,000 locations. But China has been a key growth engine for the company over the past several years, given its rapidly growing middle-class population. With about 5,300 locations, most of them KFC restaurants, Yum is the biggest Western fast-food chain operator in the country.

Despite the recent struggles, executives say they plan to forge ahead with continued expansion in the country. CEO David Novak has said the idea is to establish restaurants in key locations, much like McDonald's has done in the U.S.

In the U.S., meanwhile, the company's three chains have been introducing a variety of new items to boost sales. Taco Bell introduced an extension of the popular Doritos Locos Tacos in a Cool Ranch flavor and Pizza Hut introduced pizza "sliders." More recently, KFC introduced entree-sized boneless chicken pieces.

LAST YEAR'S QUARTER: The company earned 96 cents per share, or 76 cents per share when excluding one-time items. Revenue was $2.74 billion.

WHAT'S EXPECTED: Analysts, on average, expect a profit of 60 cents per share, on revenue of $2.56 billion, according to FactSet.

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