010518 Tricon Global Restaurants Report Lower Earnings

Louisville, KY - Tricon Global Restaurants reported lower first-quarter earnings that matched Wall Street expectations as sluggish sales at Taco Bell offset growth in its pizza and chicken brands.

The fast-food giant -- parent of KFC, Pizza Hut, and Taco Bell -- reported operating earnings of $88 million for the quarter ending March 24, down 9% from $96 million a year earlier.

The company earned 59 cents a share, down from 64 cents a year ago but equaling projections by analysts surveyed by Thomson Financial/First Call.

Tricon had worldwide revenues of $1.5 billion for the quarter, off 6% from nearly $1.6 billion a year earlier. The company expected the decline and attributed it to continuing sales of company-owned stores to franchisees, resulting in lower revenues but higher franchise fees. Tricon said those store sales should be nearly completed next year.

The company's domestic blended same-store sales were flat for the quarter. Pizza Hut continued its trend as the Louisville-based company's earnings leader, gaining 3% in same-store sales.

KFC's same-store sales rose 2%, its best quarterly performance since the fourth quarter of 1999. Tricon credited the gain to the introduction of its new Spicy Barbecue line of chicken wings.

Taco Bell had a 6% decline in same-store sales. Tricon said it hoped for a rebound partly with the introduction of the Grilled Stuft Burrito, which offers twice the meat as the company's Burrito Supreme.

“Going into the year, our number one challenge was to improve sales trends at Taco Bell and KFC, and I am encouraged by progress at both brands,” said David Novak, Tricon's chairman and chief executive officer.

Novak predicted that domestic same-store sales would increase by at least 2% for the year.

Tricon's international sales rose a net 2% for the quarter as its worldwide presence grew. Tricon opened 199 restaurants outside the United States during the first quarter, almost doubling last year's pace.

Tricon is averaging more than two restaurant openings daily outside the United States. The company said it expects to open at least 930 non-U.S. restaurants this year, up from 850 previously forecast. Last year, Tricon opened 929 non-U.S. restaurants, a company record.

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