Yum China Holdings (YUMC) Q2 2017

Micky Pant – CEO

Growing delivery sales

“On previous calls we have highlighted our growing strength in digital and delivery and we have continued to make progress in this vital strategic frontier. With over 4900 restaurants offering delivery service total delivery sales in the quarter reached $200 million which is about 13% of our total company sales.”

Towards cashless payments in china

“Mobile payment represented about 40% of our total company sales and cashless payment reached a record of $900 million in Q2 alone…If you now come to China and visit a KFC you will be surprised of the number of people not standing in line but actually ordering on their phone just like you would at an airport where you check in at a machine.”

Jacky Lo – Interim CFO, VP, Controller and Principal Accounting Officer

Looking for solid same-stores growth

“we expect our labor inflation to continue in the high single digit range and commodity inflation to be in the low single digit….in order to cover our inflation and maintain our margin, we need solid same-store sales growth….on the commodity price or specifically chicken price, commodity inflation was 4% during the second quarter and the rate peaked at 4.5% in the first quarter, this came out to 4% in the second quarter and we expect it to continue to moderate throughout the rest of the year.”

Yum! 3Q16 Earnings Call Notes

Yum! Brands’ (YUM) CEO Greg Creed on Q3 2016 Results

Chinese boycott of Western countries thanks to South China Sea politics

“Now, let’s begin today with China. As we mentioned on our second quarter call, we were pleased with the results we saw through the first six weeks of Q3, as sales were ahead of our plan. However, tougher laps in the second-half of the third quarter, which we built into the forecast were compounded by an international court ruling regarding claims to sovereignty over the South China Sea. The ruling triggered a series of protests and boycotts intensified by social media against a few international companies with well-known Western brands. At its peak, the demonstrations significantly impacted store traffic in certain trade zones and this was during our busiest season. The impact to our sales was sudden and while difficult to pinpoint the exact magnitude of the impact on the quarter. Our best estimate is, there was a 400 to 500 basis point impact to the division’s same-store sales in the quarter.”

Confident in our ability to turn around Pizza Hut US

“Pizza Hut system sales in constant currency were flat and same-store sales declined 1% in the third quarter. The U.S. market was influenced by an unsuccessful promotion and the competitive environment. As we saw earlier this year, we know the brand can perform when the right product is combined with compelling value and the messaging is distinctive and disruptive. Now, I’m confident in our ability to turn around the Pizza Hut U.S. business. We believe the fundamentals are being put in place and now execution is the focus. ”

Been in China for 30 years now

“So 2016 marks the beginning of a massive transformation of the Yum!, a transformation that has been years in the making. The first step is the October 31 separation of the China business. This business began with the first KFC in Beijing, nearly 30 years ago and has grown to over 7,000 restaurants in over 1,100 cities. Today, it is one of China’s largest employers with over 400,000 employees, serving over 2 billion customers every year. In short, this business is a powerhouse with unrivaled growth opportunities in the world’s fastest growing major economy.”

Some people may be hunkering down ahead of the election

“Sorry. Look, it’s hard to say that. We’ve been doing a bunch of work just talking to different to millennials, Gen X, Gen Y, Boomers. I think where we’re what five weeks away from a general election, I think there’s just great uncertainty as to what’s going to happen in the U.S., in particular, as a result of the outcome of the election. It goes without saying that people are sort of trying to decide who to choose and what the impact will be on the economy. And I think people maybe just hunkering down a little bit.”

Micky Pant

Yum! 2Q16 Earnings Call Notes

Greg Creed – CEO

China doing well

” I’m particularly pleased with the continued sales momentum at KFC China which delivered better-than-expected same-store sales growth of 3%. This represents our fourth consecutive quarter of positive same-store sales growth at KFC China despite the second quarter being our most difficult of the year from a historical sales overlap standpoint. Importantly, our China Division is off to a good start in the third quarter for both KFC and Pizza Hut Casual Dining, including a return to positive same-store sales at Pizza Hut Casual Dining in recent weeks.”

Challenging conditions in the US though

“Outside of China, challenging industry conditions in the U.S. contributed to soft sales results. However, our three brand divisions in the aggregate delivered core operating profit growth largely in line with our expectations and remain on track to deliver against their full-year core operating profit growth targets. ”

Even though US soft in Q2 we’re seeing some momentum in Q3

“we said we’re seeing some improvement as we start the third quarter. Taco Bell which obviously was negative in Q2 has turned positive in Q3 through the first five or six weeks of the quarter. The KFC U.S. number is also stronger than the plus 2% we had, so I think we’re feeling that there’s some momentum. Obviously, I think as we all know in the U.S., the market is a little soft, but I think that we see some momentum in sales. I think that we believe that commodities will be under control and I think as I even may have said on the last call, we’re confident we can deliver the outside of China profit numbers even if the sales numbers are just a little tough to get to.”

We missed on transactions at Taco Bell in US

“And if you, if you want to talk about the U.S., I think that was also part of the question. I think the Taco Bell miss was a transaction miss pretty much. I think that’s probably the best way to describe it. And our look at the category also is probably for the trailing 13 weeks the U.S. is probably running about minus 1 same-store transactions and probably around plus 1 same-store sales. So that’s the sort of numbers that we see. But the Taco Bell miss was essentially driven by transactions. But as I said, I’m happy that in the first five or six weeks of the third quarter we’re back in positive territory on Taco Bell. So that’s a nice change in momentum.”

I think there’s a malaise in the US right now

“I think, as we said earlier, there is I call it a malaise in the U.S., is probably the best way to describe it. And I think there was an interesting report out yesterday that I think 75% of people 18 to 30 believe that the U.S. is either falling behind or failing as a nation, according to a GenForward Survey. So that’s not particularly good news from just what are people thinking. As I said earlier, we believe that in the U.S. the market is on a trailing 13 is about a minus 1% in transacts, it’s probably plus 1% in sales. As I said, I think the good news is we have started the third quarter stronger than we had in the second quarter”

Micky Pant

You get better lease deals when economic conditions are tough

“we’re very confident that we’re not over-expanding at all in the smaller-tier cities. It is our belief that under challenging economic conditions you get the best long term deals and if we’re able to secure long leases for these stores, we’re very confident these stores will make good returns in the future. So I don’t think we’re concerned at the moment with the rate of return on our new store sales.”

We have to watch commodity inflation in the back half

” We have to watch commodity inflation in the back half.”

YUM! Brands 1Q16 Earnings Call Notes

Yum! Brands (YUM) Greg Creed on Q1 2016 Results

Micky Pant – CEO-Yum! Restaurants China, Yum! Brands, Inc.

Seen a moderation in inflation from wage increases in China

“Well, it’s true that over the last five years labor has inflated in China on account of minimum wage increases by the government. But we’ve seen a moderation of that. I think the authorities recognize that the economy has to be supported, so I think we’re seeing a more reasonable picture there. What we did get in the quarter particularly was some good productivity gains on account of using more part-time and student labor, which is a phenomenon that did not exist in China in the long past, and that is making a difference. So looking forward, it’s always a risk, but I don’t see labor price inflation as being a significant risk.”

The Chinese team is feeling a lot more confident

“Like I said, I think the team and myself are feeling very much more confident. We just this week had all of our store managers, so we had a stadium in the city of Dalian with 8,000 people talking about the theme for the future, which is From Strength to Strength. And in particular, when the KFC section was discussed and we put out plans for the rest of the year and the positioning and the proposed marketing, there was just an unbounded confidence. So I feel that – I really feel the brand is making a lot of progress. It is much stronger. I think the positioning is very clear. ”

I think you always have to be cautious when it comes to China

“I think you always have to be cautious when you come to China, because there is economic volatility, and there is also unexpected twists and turns. So there is nothing hidden; it is not as though we are worried about some specific event or there is something happening that causes us to worry. But you just want to be cautious. We’ve had two years or three years of a lot of volatility.”

Infrastructure growth in China should lead to new store formats

“We are experimenting with multiple store formats to take into account the fact that there is still a very rapid build-out in infrastructure in China. So we’re expecting – very large number of malls are already under construction; the high-speed rail network is being expanded. And then in China, unlike the U.S., there is not the phenomenon at the moment of highways with drive-throughs or the rest stops, and all those are being developed.”

I’m always amazed at how advanced China is digitally

“I’m constantly amazed at how advanced China is digitally. It’s got twice the number of cell phones, smartphones, as the U.S. population. And even in our offices, people go up and down the elevator to go to lunch, they’re looking up where the offers are available and where they can book a table, et cetera. So the action is shifting very rapidly to mobile devices, and both the menu as well as digital marketing is becoming very significant. So we’re working on that. ”

David Eric Russell – Interim CFO, Vice President-Finance & Corporate Controller

China is moving to a more traditional VAT regime

“Okay. So, on the VAT, so currently, China is paying 5% of all their sales in the form of a business tax to the government. What’s happening now is China is moving to a more traditional VAT regime, which is similar to the regime in many other parts of the world, where we will pay 6% of those top-line sales to the government; but we’ll get a credit for some of the inputs that we have into our P&L, commodities, utilities, rent, against that 6% credit”

Yum 4Q15 Earnings Call Notes

Yum! Brands’ (YUM) CEO Greg Creed on Q4 2015 Results

Spinning off China division

“2016 will be a transformational year for Yum!, as we complete the spinoff of our China division, ultimately creating two powerful independent focus growth companies. The fundamental goal of Yum! however is unchanged. We are 100% dedicated to building and strengthening KFC, Pizza Hut and Taco Bell all around the world as strong brand critical to delivering the same growth and creating shareholder value over the long-term.”

Macro environment has impacted casual dining segment in China

“The macroeconomic environment and volatile stock market has impacted the Casual Dining segment and we know we have to generate more exciting news and value to counter this headwind. ”

We are encouraged by what we’re seeing in China in January

“I want to give you a quick update on January sales in China. We are encouraged by what we are seeing at KFC, but Pizza Hut sales remain soft. It’s difficult to gauge exactly where the first quarter will finish, especially given the earlier timing of Chinese New Year. But at this point we expect same-store sales growth to be up low-single digits for the division which sets us up well for the balance of the year.”

The macro in China has gotten worse since December

“Well I think first of all, obviously the macros which have got worse since December, since we were all together in December and I think we all know that macros impact casual dining more than they impact QSR. So, I think there’s definitely that issue. I would agree with you that we’ve not had enough value in use to overcome this backdrop.”

There’s been a big value push in the market

“Just let me talk to about whole question about value, I think the great thing is that Taco Bell is incredibly well positioned, it remains the value leader. But look, we’ve all seen what’s been happening in the marketplace in the early year: five for $4, four for $4, two for $2, so let’s not kid ourselves. So, there’s been a fair amount of value initially out there.”

For pizza hut in China, the macro affects casual dining more than QSR

“we’ve seen this not just in China, but outside that casual dining is impacted by macros. It’s just what happens. And it always has a bigger impact on casual dining when macros are volatile and changing than it does on the QSR business. So if I were to say what are the four factors, I would say macros.”

Customers in lower tier cities have been more significantly impacted

“So first on China same-store sales, similar to recent quarters, performance was stronger in Tier 1 cities at both brands. Our view is that customers in lower tier cities have been more significantly impacted by the softening economy, particularly around the industrial cities, which have been more heavily affected by China’s slowing export trade.”

You can’t just water the new plants

“The way I look at it, look the new plants that you — trees that you plant and the ones that are growing both need water. You just can’t throw water on the new plants. You got to throw water on the big strong trees to make sure they continue to be big, strong, and keep going.”

Pat Grismer

Planning to maintain 5x EBITDA leverage

“I’m also happy to report that we’re on schedule to complete our recapitalization in the first half of the year, issuing incremental debt of approximately $5.2 billion and plan to maintain roughly 5 times EBITDA leverage going forward.”

Yum 3Q15 Earnings Call Notes

Greg Creed – Chief Executive Officer

Performance is anything but satisfactory

“Delivering 14% EPS growth in today’s environment would normally be considered a very good result. But these are not normal times and our performance is anything but satisfactory.”

Pizza Hut significantly lagging performance of competitors

“Pizza Hut was relatively flat, which we could argue was pretty much in line with expectations. But let’s be honest; we’re still significantly lagging the performance of our nearest competitors and we clearly have much urgent work to do for this brand to fulfill its potential”

We take full responsibility for our results in China, we should be performing better

“Let me start by being really clear. We all and I personally take full accountability for our results in China. And while there is clearly a macro softening going on including headwinds from unexpected foreign exchange pressures and yes, the online ordering aggregators who are delivering for mom and pops are in a death battle for supremacy with heavy discounting and the malls look more like fancy food courts than shopping centers, the simple facts are that the economy there is still growing and there is every reason and no excuses to why we should not perform better.”

In recent weeks we’ve seen companies cut back on parties dinners and entertaining in China

“In mid-August, we launched a premium-priced steak product, in hindsight, just as the macro started to weaken. Furthermore in recent weeks, we’ve seen companies cut back on parties, dinners and entertaining. So, while our weekend business is going okay, this has impacted our weekday dinner results significantly.”

A savage battle for supremacy among delivery aggregators going on in China currently

“there is definitely what we call a savage battle for supremacy going on about — around the aggregators who are obviously heavily discounting. We are actually putting our foot in the water and playing with them but it’s a very small part of our business. So, I think the answer is that we don’t believe that the economics will sustain all the people that are currently in the market playing at these discounted prices. And I think as we’ve seen these aggregators in other parts of the world because China is not the only place where this is occurring, what tends to happen is they are all fighting for market share dropping the prices but then eventually the prices have to go up. ”

The business will recover, we just don’t know when

“the one thing we are sure of is that the business is going to fully recover over time. We can’t be precise about the exact timing of that. It is very difficult to call and there’s no denying the fact that the shape of the recovery today is weaker than we had previously expected. ”

I still think there’s huge growth potential in China

“We do believe that the consuming class will go from about 300 million people to 600 million people by 2020. And whilst we can certainly look at the competitiveness of the China market compared to a few years ago, if I compare that to the competitiveness of the market in the United States, it’s not even close. So, I’m still bullish on China. I still believe it’s a place that we can get significant growth both for ourselves and for our shareholders. ”

Pat Grismer – Chief Financial Officer

Economic conditions weighing heavily on China

“extraordinary volatility in financial markets, the surprise currency devaluation and overall softer economic conditions are weighing more heavily on the higher ticket casual dining sector in China.”

The drivers behind the China decline emerged rapidly and without warning

“the deceleration in China sales was led by Pizza Hut and the drivers behind that decline emerged very rapidly and without much warning. In today’s volatile environment with the recent macro and competitive pressures we mentioned, it continues to be difficult to forecast sales in China for both brands.”

Andrew Sohn Notes SKIS, DAL, YUM, NFLX, DPZ

Andrew Sohn, a junior at Columbia University, has started to contribute to Avondale’s company notes database. Below are quotes from some of the calls that Andrew has read this week.


SKIS- Timothy Boyd, President and CEO


Macroeconomic headwinds were balanced out with increased demand in discretionary spending

We still felt we could reach last year’s numbers due to the pent-up demand and the excellent conditions that existed at our areas. Well that’s in fact what happened. We finished pretty much in level on both revenue and EBITDA year-over-year, and we view EBITDA as the primary benchmark for the successful execution of our strategic plan. Our properties once again demonstrated their ability to perform despite some significant weather challenges. This performance illustrates these properties consistency year-in and year-out.


Acquisitions to come

In terms of our acquisition status, we continue to look at several different opportunities. They all vary in size, scope and strategic value. As I have described in the past, this process involves working through these deals in the summer months and ultimately closing in the fall prior to the ski season. We are currently in this process right now and we are optimistic that we will be able to complete one or more of these acquisitions this fall.


Day and overnight drive ski industry

I think it’s important to reiterate how this season again demonstrated how the day and the overnight drive segments of the ski industry, which our portfolio represents continue to be very consistent performers. Going forward we also believe these type of properties will continue to represent attractive investment opportunities.


Strong demand for skiing

In terms of some of the trends we are seeing for next season, we believe the outlook is very positive. Obviously, we can’t predict the weather, however, we are still seeing strong demand for our product. Clearly, last season’s strong performance in spite of some of the weather setbacks demonstrates that continued strong demand. Growth in our early season pass sales is another significant indicator of our strong demand.


Great discretionary spending

This past season, as Steve mentioned, we saw an uptick in revenue and retail, ski school and food and beverage. We believe at least partially this was attributable to the lower gasoline prices. Since almost all of our customers drive to our facilities, we see this additional disposable income as a very favorable trend for us going forward.



DAL-Richard Anderson CEO


Expansion into Latin America

Our stake in GOL will further this effort as the largest domestic carrier in Brazil and it will provide significant long term upside in the region for Delta particularly as we move toward open skies with Brazil, when we couple our investment in GOL with the significant investment we have in AeroMexico we have the foundation for the strongest network in Latin America.


Ed Bastian President


Reducing winter capacity in the pacific

As we’ve laid out previously, restructuring our Pacific network is one of our biggest opportunities for margin improvement going forward and the early results of these efforts are positive. As part of these efforts, we’ll be reducing our winter capacity into Pacific by 6% to 8% including retiring six of the 747s and cancelling the loss making Seattle Canada service.


YUM-Greg Creed, CEO


China recovery is a rocky road

There is no doubt in my mind that we will make a full recovery over the long term and return to historic average unit volumes. We have the two strongest brands in China by a wide margin, but frankly the recovery is taking longer than we would like. We need to be more aggressive, more innovative and much more disruptive to step change the business… In any event, our top priority is to get our China business back on track and we are making steady progress as evidenced by our first and second quarter results. As we’ve discussed, we expect to have a strong second half of the year based on continued progress in China and fully expect YUM! to deliver at least 10% EPS growth in 2015.



Growth in existing spaces is a key strategic play

Additionally we continue to rollout our premium coffee. As of quarter end we offered our coffee in over 2,000 stores, providing an incremental sales lift of about a point of the stores offering coffee. The key to success in this business is grow existing or create new sales layers to build on. We’re excited that premium coffee is already driving sales and profits, while giving us another platform to grow from going forward.



Pat Grismer, CFO


KFC doing well in foreign marktes

An important element of this is robust franchise led international development as KFC opened 122 new international restaurants in the quarter and is on pace to set a new record this year opening 700 new international restaurants outside of China and India, including a recent new market opening in Myanmar, demonstrating the strength and broad appeal of this iconic global brand.


KFC thriving, Pizza Hut and Taco Bell more of a challenge

Outside of China we expect KFC to have another solid year and Pizza Hut to fall well short of its ongoing growth target despite the improving results we expect in the balance of the year. For Taco Bell, although we expect solid performance in the balance of the year, we expect much more moderate profit growth as we overlap stronger sales and margin performance from last year.


NFLX-Wilmot Reed Hastings, CEO


Undergoing cautious expansion

Over the last year, we’ve raised ASP about 5%. We’d like to keep that moving. So we’re going to continue to have incentives for people to move up in the plans as suits their usage pattern, but we want to take it very slow. Things are going well. There’s no reason to be disruptive. We’re not planning anything in the U.S. this quarter. It’s really focused on going very steady, very slow; and over the next decade, I think, we’ll be able to have more and more content and add more value and then to be able to price that appropriately.


Why Hulu struggled in Japanese markets

Well, Hulu had a couple of missteps. But now, today, four years later, under new ownership, they’re actually growing and seeing some real success in Japan. But the initial missteps, where pricing was too high, it was ¥2,000 or about $20 at that time a month, had no local content. So it seems pretty substantial missteps. In contrast, our pricing will be more aggressive than theirs was. We’ll have a local content, we may have some local originals. And Japan is a unique market because it’s very brand sensitive. So Japan will probably be our slowest market to get to certain penetration threshold, but it may be one of our best markets in the long-term because when the Japanese society embraces a brand, it’s a very deep connection, very long-term.


Theodore A. Sarandos, CCO


Latin American expansion

Absolutely. We’ve recently expanded beyond our own original shows. The only way to watch those shows in Spanish in the U.S. is on Netflix with subtitles and dubs available that we’re making for Latin America. And now we’ve licensed a lot of programming from Latin America into the U.S. and are getting incredible viewing on shows that were successful for us in Mexico that are now drawing huge numbers in the U.S. And, again, that’s a very different demographic than we’ve targeted before and are just barely starting to touch them by getting hundreds of thousands of hours of days on single shows. So really, really impressed with the relatively quick take-up on these shows.



David B. Wells, CFO


Deeper expansion might require different content creation streategies

As we penetrate deeper into the markets, there might be a question in terms of do we have to add more of the local mix into that and that will have implications for our content spending in each market, but right now what we’re seeing is that our current mixture is working across the markets.


NFLX still very much in growth mode

The move towards the global right will be one that will take a couple of years, few years to really flow through. Similarly through our move towards exclusivity, and in terms of the P&L implications for international margins. It really is going to be more about the penetration growth and the rate of growth in that market to begin with.



DPZ-Mike Lawton, CFO


Growth in new store openings and existing stores was strong

Our domestic and international divisions posted very strong same-store sales growth. We opened a significant number of new stores and our EPS grew 20.9% over the prior year…The drivers of this growth included domestic same-store sales which rose by 12.8% in the quarter. The increase this quarter was comprised of franchisees same-store sales which were up 12.8% and company-owned stores which were up 12.5% and this was due primarily to strong order growth.


Growth in foreign markets is strong too

Our international division had another strong quarter as same-store sales grew 6.7% lapping a prior year quarter increase of 7.7%. Our international division also grew by 172 stores made up of 178 store openings and 6 closures.


Revenue drivers:

Turning to revenues, total revenues were up $38.2 million or 8.5% from the prior year. This increase was primarily a result of three factors. First, higher domestic same-store sales and store count growth which resulted in increased royalties from our franchise stores and higher revenues at our company-owned stores. Second, higher supply chain center food volumes as well as increased sales of equipment to stores in connection with our store reimaging program. These supply chain volume increases were partially offset by lower commodity prices. And third, higher international royalties again from increased same-store sales and store count growth, which were partially offset by the negative impact of foreign currency exchange rates.


Patrick Doyle, CEO


Digit sales huge part of growth

Markets outside of U.S. are doing about 40% of sales from digital channels and while there are markets showing high levels of experience and excellence on the digital front, the opportunity exist to introduce and grow technology within many others. We look forward to helping our master franchisees established a digital presence or reached full digital capability within their market.

YUM Brands 2Q15 Earnings Call Notes

China SSS down 10%, but improvement from last Q

“Let’s start today’s discussion with China. Same store sales continue to show steady but slower than expected progress. This quarter’s 10% decline marks an improvement from the 12% decline last quarter despite a more difficult overlap.”

Taco Bell doing best

“We are making continued progress in China. Taco Bell is going from strength to strength. KFC continues to build on its momentum and Pizza Hut is in turnaround mode.”

EPS decreased 5%

“Earnings per share excluding special items decreased 5%. This was substantially better than the decline we had originally estimated.”


“Reported EPS declined 28% in the quarter. This includes a $68 million non-cash special item charge related to our decision to sell Mexico real-estate, negatively impacting reported EPS by $0.13 in the quarter.”

Two safety issues in China

“remember we’ve had two safety issues, which we’ve never had before alright, so we’ve never been able to model two safety issues and there’s obviously some slowness in recovering that. ”

We need big growth to meet our 2nd half estimates

“EPS is down 7% and as I said in my prepared remarks earlier, to achieve full year growth of at least 10%, EPS needs to grow nearly 30% in the second half of the year and I don’t think of that as an overly conservative number.

Obviously its heavily dependent on the results of our China division where profits were down about 30% in the first half of the year, and in order for China to deliver on its expected share of second half EPS growth, second half profits there need to be more than double of what they were last year. But we’re confident China can deliver this result, but with 60% of their profits being generated in the second half, I don’t think it’s prudent to adopt a more aggressive stance and lean in on this.”

We think we can get there despite strong EPS headwinds

“Additionally as I mentioned, foreign exchange headwinds are much stronger than we had originally estimated, but this is factored into our overall EPS guidance. So I just want to make it very clear, we expect to have a strong second half based on continued progress in China and we fully expect to deliver at least 10% EPS growth for the year.”

I think China is growing at slower pace but it’s still the fastest growing in the world

“I mean I think that generally the economy is growing at a slower pace. So it’s fair to say that and that that is putting pressure on retail generally. I think we also need to bear in mind that with GDP growing this year at around 7%, it remains the fastest growing large economy in the world.”

Tier 1 China cities less phased by safety issues

“we are seeing stronger performance in our Tier I cities at both brands. It seems that the Tier I consumers are less phased by the supplier publicity this time around and I would say that that’s especially encouraging, because that’s where we have a higher concentration of stores and also face the strongest competition. So I think that’s further evidence of our brands ongoing recovery and resilience.”

We haven’t seen much change in consumer perception on account of the Modi government

“I think that we did expect – I think with the Modi government change that there might be a sort of perceptible change in consumer perception and I guess that probably hasn’t had, we haven’t seen that.”

Almost everyone asked about China

“Yes, Karen, thank you for asking a non-China question.”

Yum! 1Q15 Earnings Call Notes

Never pleased with decline in EPS, but…

“You can never be pleased when you report an EPS decline for the quarter, but the story behind the numbers gives me even more confidence that we can and will deliver at least 10% EPS growth in 2015”

China sss declined, but business is improving

“Let’s start with China. Same-store sales declined 12% for the quarter. The best I could tell the whole story. The fact is that the business is clearly improving. Same-store sales and customer metrics continue to move in the right direction. ”

Pleased with constant currency growth of 50% in Russia

“I was particularly pleased with the continued impressive growth from our Russia business where system sales grew nearly 50% in constant currency.”

Pizza hut being outperformed by competition in US

“Moving to our Pizza Hut division where our results have admittedly been soft and worse yet we’re being outperformed by the competition. As you know we recently launched a new pizza platform in the U.S. where over half the division’s profits are generated.”

Labor inflation in China was about 10%

“Labor inflation in China was about 10%”

Inflation wont be as bad as we expected

“taking you back to where we were at in New York when we provided guidance around commodities, at the time we were expecting about 2% to 3% at Taco Bell. It’s now looking like it’s going to be flat, closer to flat and that’s because what we’re still expecting inflation in beef it’s not going to be as extreme as we have thought. We’re actually seeing higher deflation for cheese than we had originally expected and we’re also seeing now deflation in chicken, so all of the things are working in our favor.”

We’re a brand building company

“we’re a brand building company and every day each one of our brands in 126 countries we operate is really focused on four things. Making our brands more relevant, making them more engaged, making them all connected and demonstrating that we care.”

YUM FY 3Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

More food supplier problems in China

“our strong first half results have been offset by an unexpected and highly publicized food supplier incident in China, which significantly impacted sales at both KFC and Pizza Hut. As a result, we are now estimating full year EPS growth of 6% to 10% prior to special items.”

Retaurants/capita comparison US vs China

“Yum! Currently has five restaurants per million people in China with a consuming class is expected to grow from 300 million people in 2012 to over 600 million people by 2020. This compares to or about 60 restaurants per million people in the United States where the consuming class is about 300 million people today.”

New CEO in the new year

“I want to point out that this will be my last earnings call as CEO, and the Greg Creed will be the CEO beginning January 1, which time I will assume my new role as Yum!’s Executive Chairman of the Board.”

China is recovering for us

“We remained very confident that we will see a recovery in what we estimated a six to nine months period because we saw in the month of September that sales were substantially better than they were in the month of August which was the month immediately following the publicity incident. So we are clearly recovering. We are also seeing consumer scores improving and that further reinforces our belief in this recovery.”

So far the trajectory of the China incident is the same thsi time as the last time

“as we step back and look at how sales and consumers scores are trended in the two months or so since the incident, I would say that the trend is broadly in line with what we saw the last time, but again we are relatively early in the stage of this recovery and we continue to believe that we will see a full recovery in a six to nine months timeframe.”

These incidents are a chance to get stronger

“I would never be one to say that we could never have any incident like this again. And but I can tell you we get stronger from everything that we had– ever happens like this we get lot stronger and stronger from — we improve our processes that are already strong. Everything we can do to learn from and get better. ”

It takes 6-9 months to recover from a highly publicized event

“what we’ve learned over time it really doesn’t matter even almost a big, the issue there if there is a highly publicized event, it takes six to nine months to recover. Just because consumers are cautious when it comes to food intake. “