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Chicken giant plucks big profits in China

 KFC has 4,000 stores in its booming Chinese market.
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Date published: 10/13/2012


Associated Press


--The owner of the Taco Bell, Pizza Hut and KFC chains predicted this week that its fast-growing China business will serve up another round of strong profit growth next year despite a slowing economy in its most important overseas market.

Yum Brands Inc. executives also foreshadowed more menu rollouts in the coming year at its flourishing Taco Bell business in the U.S.

The Mexican-style chain has seen its sales grow on the popularity of its Doritos Locos Tacos, with shells made out of Nacho Cheese Doritos, followed by a rollout of more upscale food created by celebrity chef Lorena Garcia.

One day after reporting a quick profit turnaround in its China division, Yum executives said they're confident of achieving 15 percent profit growth in China next year, driven partly by a record pace of restaurant openings and new product introductions.

"Our China business is having another strong year," Yum Chairman and CEO David C. Novak told industry analysts. "But as I've said before, China is going to have its inevitable ups and downs. We now face a slowing economy. But that doesn't change our long-term outlook in China one iota. Our annual performance has been pretty consistent, and I expect this to continue."

China's economic growth fell to 7.6 percent in the three months ended in June. That's robust by the standards of the United States and Japan, where growth this year is forecast in low single digits. Analysts are forecasting a rebound in China late this year or in early 2013.

"China, even with its challenges, is still growing at a reasonable pace," Novak said.

Yum said Tuesday its third-quarter operating profit in China rose 22 percent, a quick rebound from a decline the quarter before.

That turnaround in China, coupled with strong profit growth at its restaurants in the U.S. and elsewhere around the world, helped Yum post a 23 percent increase in its third-quarter net income.

The second-quarter profit decline had been a rare event for Yum in China, and was blamed on rising costs for ingredients and workers. Those costs have since moderated, helping improve profits.

Yum opened its 4,000th KFC in China in August, and has ramped up its breakfast offerings, 24-hour operations and delivery services at more KFC stores there. Pizza Hut has a growing presence there, too.

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