Yum Brands ends 2019 strong, but China virus could cut sales

KFC owner Yum Brands Inc. ended 2019 with better-than-expected sales, but the impact of the new virus in China could weigh heavily on its first-quarter results.

Yum said more than 30% of its 8,790 restaurants in China are currently closed. At restaurants that remain open, same-store sales — or sales at locations open at least a year — have fallen by 40% to 50% since the Lunar New Year holiday ended earlier this week. Delivery is still available, but many customers are avoiding going out, the company said.

Yum said it's not yet able to say what the full financial impact of the virus will be. China made up 27% of KFC's total sales and 17% of Pizza Hut's sales in the fourth quarter.

"This will certainly be a headwind for 2020," Yum CEO David Gibbs said in a conference call with analysts Thursday.

The company added that KFC and Pizza Hut are providing 1,000 free meals each day to medical workers at seven hospitals in Wuhan.

Yum shares dropped 3% to $103.52 per share in morning trading.

Yum said fourth-quarter revenue rose 9% to $1.69 billion. That beat Wall Street's forecast of $1.65 billion, according to analysts polled by FactSet.

The Louisville, Kentucky-based company reported net income of $488 million, or $1.58 per share. Excluding one-time items, the company earned $1 per share, which fell short of Wall Street's forecast for $1.13.

Yum was stung by a change in the value of its investment in food delivery company GrubHub, which shaved 5 cents off its fourth-quarter earnings per share. Yum bought a stake in GrubHub for $200 million in 2018, but the platform has been struggling in the increasingly competitive food delivery market. GrubHub's net loss widened to $27.7 million in the fourth quarter, from a loss of $5.2 million in the same period of 2018.

Same-store sales rose 2% for the fourth quarter. That was in line with Wall Street's forecast.

For the full year, same-store sales growth rose 3%. Taco Bell led with 5% growth, KFC's sales rose 4% and Pizza Hut's sales were flat. KFC ended 2019 with more than 50,000 restaurants worldwide.