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Yum! Brands: Growth Prospects In Future

March 30, 2014 | About:
mitu77

mitu77

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Yum! Brands (YUM), A Quick service restaurants that has been expanding its footprints globally and is constantly working on its marketing strategies to influence the top and bottom lines. The company is taking marketing initiatives to promote its menu nationally. It is taking up a re-imaging plan and focusing on a food-centric approach. This program is a sales growth driver and cost effective, and the company expects to earn a higher return on investment. At the same time, it continues to expand its franchisees and is focusing on its long-term strategic initiatives to drive growth. The company thinks that this business model will help it develop a strong brand image and save the energy spent in its day to day operations.

Financials

Yum! Brands, recently released its Q4-2013 results. It reported revenue of $3.59 billion, a sequential quarter growth by almost %570 million. For fiscal 2013, each quarterly result recorded a sequential growth and this trend continued in the Q4-2013 results. Operating profits recorded $571 million which again is a sequential growth over previous quarters and the trend of growth was on an upward trend in each quarter of 2013. Operating profit recorded $571 million with net income as $315 million.

Yum! Brands get major percentage of its sales from China, which was still facing the residual effect of the poultry supply incident, and thereafter, was affected by avian flu. But, it is bouncing back from the aftermath of the avian flu as it records steady sequential quarterly growth. The fiscal 2013 recorded revenue of $6.905 as again $6.889 billion for the fiscal 2012 signifying marginal growth.

Its operations in India which again is a raw market the performance of YUM is improving with sequential; year performance and sequential quarter performance. Fiscal 2013 recorded total revenue of $127 million as against $102 million in fiscal 2012, a growth by over 20%.

The company is expected to perform better in the coming quarters of 2014 as it focuses on marketing and more product launches.

Business prospects

The efforts of the company in the fiscal 2013 enable the company to bounce back in 2014. The company expects at least growth of 20% on the EPS and consistent double digit growth in EPS in years to come.

The company is also optimist about it Chinese market growth which has not been performing well due to various reasons like epidemic viral being the main cause. The progress that Yum is making in Chinese market they are confident to bounce back in 2014 making a healthier top and bottom line of the company. The confidence about its performance is based on the fact that Yum! had taken various measures to strengthen its KFC business in China, and expect to reap the benefit in this year and future. Measure like food safety and stronger poultry supply chains are the major steps that Yum! has undertaken to have a strong hold of the market and drive in more traffic to KFC.

Strategic moves

New organization structure to stay focused on various regions and this will always have an impact on the ongoing and future growth.

This year, Yum combined restaurants international; and U.S division into three global brands division, KFC, Pizza Hut, and Taco Bell. China and India will remain separate entity which can help the company to focus in this area with independent policies for these regions. The main objective of this new structure is to establish a higher brand values and more aggressive global growth. Both India and China contribute heavily to the total contribution of the revenues for Yum.

Journey Ahead

The outlook of the company for 2014 successive quarters is very positive under its new model. Operating profit of KFC is anticipated to grow at 6%, Pizza hut by 8% and Taco bell to increase by 6%. On combining the growth of all the 3 restructured segments it is expected to rise by 15% in China. It also anticipates 10% growth in the EPS with fair contingency.

The company continues to deliver strong performance with its other brands like Pizza Hut, Taco Bell, and its U.S. restaurant casual dining business. The company is committed to long-term growth and is targeting around new KFC units in China and India.

The good news is that Yum is bouncing back in china and the business is recovering. The business growth in China means, it now expects a positive same-store sale growth in the region in future.

The company is taking up extensive advertisement featuring protein alternatives available at KFC stores like shrimp and mushroom rolls. The company is popularizing its new products like salads, flatbread sandwiches, and boneless chicken to attract younger and up market clientele.

Competitor

One of the leading competitors of Yum! Is McDonald’s and is battling over to acquire a bigger bite of the market share. McDonald is also focused to spreading its network globally. Not only India and Asia but McDonald also opened new branches in various other countries Vietnam and is seeking to take advantage of the growing middle class there. McDonald’s plans to open 1,200 to 1,300 new branches, and it would be spending an enormous $3 billion on this exercise. From an investment point of view, McDonald's looks like a good buy as it is present in more than a hundred countries with close to 35,000 restaurants.

Conclusion

If you followed Yum! Over the years, you would always witness that it has performed like an empire that is gradually building. Yum! Has had a steady performance over the years, recording minimum growth of 10% in EPS year after year.

Even with such heavy competition, Yum! Brands are committed to its path of growth and are making substantial investments in its various strategies.

With Yum! bouncing back in Asian region, it further adds a brighter future. The company is still expanding the KFC, Pizza Hut, and Taco Bell branches across China, the U.S., and India. The company considers 2014 to be its year of resurgence and is expected to perform well in the future with its affordable services and innovation and by upgrading its assets.


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