HONG KONG -- The Chinese consumer is under a lot of pressure. With spending sprees on cars, electronics, home appliances, real estate and meals out at restaurants, he and his 1.3 billion fellow citizens are expected to lift the global economy out of recession and help companies around the world prosper.
So far, it's working--at least for Yum! Brands, the Louisville, Ky.-based fast-food corporation. Yum!, which operates KFC and Pizza Hut worldwide, attributed better than expected third-quarter earnings to increased sales growth in China.
From June to September, Yum! opened 267 new restaurants, 88 in mainland China. The company reported sales growth of 11% from restaurants there, which offset a 5% decline Yum! saw from its U.S. locations.
With 32% year-on-year operating profit growth, the company said, the Chinese market largely sparked its 15% worldwide operating profit growth. Despite disappointing U.S. sales, profit growth in the U.S. was up 18% because falling prices pushed costs down.
Yum! reported earnings per share of 70 cents for the third quarter. In a statement, the company raised its full-year 2009 earnings per share forecast to $2.14 from $2.10, "driven by stronger than expected full-year performance in China and a lower than expected full-year effective tax rate."
"China and Yum! Restaurants International are on track to open over 1,400 international new units this year," Chairman and CEO David Novak said in a statement. "We are especially pleased that our China team achieved margins near record levels with high average unit volumes."
Mainland China is a focus for the company, which in 2008 opened more than 500 new restaurants there. Operating profits for the China division that year, which includes Thailand and Taiwan KFC, totaled $469 million.
