For years, Yum! Brands Inc. (NYSE: YUM) was the hot fast-food company. The owner of KFC, Pizza Hut and Taco Bell smoked its competition, largely because of its years-long success in China. Now, the company has faltered enough that its fortunes are even worse than those of troubled McDonald’s Corp. (NYSE: MCD).
Source: courtesy of KFC
Yum revised its numbers down and added activist Keith A. Meister of Corvex Management to its board. The addition of Meister was a humiliation to Yum board, but the forecast was more important. Some investors believe Yum will be broken up, but the parts may be worth no more than the whole. All of this has badly hurt the reputation of Executive Chairman David C. Novak, who claims most of the success of Yum as it moved from a niche company to a leader in its industry.
The fast-food chain operator announced:
Compared to our outlook as of our second-quarter earnings release, we now expect incremental foreign exchange headwinds to negatively impact our full-year EPS growth rate by one to two percentage points. Combining this with the revised China sales trends outlined above, we now expect our EPS growth, prior to Special Items, to range from about flat to low-single-digit positive for the full year.
To provide our investors greater visibility to sales trends in China, beginning with October and through the end of the year, we will report monthly same-store sales. We will release estimated October same-store sales for our China Division on November 12, 2015, after market hours.
Yum has always kept its results close to its chest, so the same-store decision is important. Investors will no longer have to wait for surprises.
Yum shares had an impressive trajectory from five years ago until March, with an increase over that period of more than 100%. In the past three months the stock is down 21%. By contrast, McDonald’s shares are up 6% over the same period.
Novak was the most admired fast-food company chief for years. He has lost that distinction, as Yum has fallen on hard times almost no one would have expected.
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