YUM’s investor conference is coming up on December 9th.  This annual meeting in New York typically proves to be helpful to me as management takes the time to provide not only an overview of current business trends but also to give more details around current initiatives at each business segment.  I recently received the agenda for this year’s meeting (included below) and was shocked to see that both a U.S. Overview and China Overview were missing from the agenda.   


I understand that YUM management has supplemented this annual meeting in the last couple of years with additional investor days throughout the year so it might be a waste of time to replicate that level of detail at its New York meeting.  Specifically, YUM hosted separate Taco Bell, KFC, Pizza Hut and YRI Investor days throughout this past summer and management should be commended for dedicating that much time to the investor community. 


The agenda for the December meeting, however, seems to focus only on YUM’s areas of business, which are currently strongest and fails to address issues in the U.S. and China where sales trends have been the weakest.  I realize that CEO David Novak will likely address both the U.S. and China in his Yum! Overview but judging from the last earnings call when about 70% of analysts’ questions (a good gauge of investor interest in my opinion) were focused on both the U.S. and China, these are the areas of the business about which investors have the most questions and concerns.  And, being that the U.S. and China combined account for about 70% of YUM’s segment operating income, investor concerns are warranted.


Regarding the U.S. business, we will only be hearing specifically about Taco Bell, which is arguably the company’s strongest U.S. concept.  Same-store sales turned slightly negative in Q3, but this is not surprising relative to the recent softening and increased discounting we have seen across the board for the QSR industry.  More concerning is the 13% comparable sales decline at Pizza Hut and the 2% decline at KFC which came only one quarter after the Kentucky Grilled Chicken launch.  Yes, we already heard about Pizza Hut and KFC during the summer investor days, but we also heard about Taco Bell.


We will also be hearing more about YUM’s initiatives in France and India.  We know management feels good about its growth opportunities in both of these markets because they have highlighted them both in the last two earnings calls.  On its 2Q09 earnings call, management commented, “Yum! Restaurants International’s new growth markets delivered 16% system sales growth this quarter with the benefit from new unit development in high growth markets like France and India. Our KFC France business generates the highest KFC average unit volumes in the world of roughly $4 million per year. With this kind of sales, we believe we have the unit economics to drive scale and can expand KFC rapidly from 79 units and modest profits today to over 300 units and at least $100 million in profits in France.


Likewise, India continues to drive impressive growth. We now have nearly 50 KFCs. Same-store sales are up around 25% and we now have double-digit store level margins. We are more confident than ever that we will be able to build significant KFC scale.”


I think it is important for management to spend time talking about its biggest growth opportunities as investors need to know where we go from here.  I also think that investors need to understand the current issues and what is being done to address them now in order to feel more comfortable with the company’s future prospects.  We will see what management has to say on December 9th.  Stay tuned.




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