(Corrects paragraph 3 to show company plans to add 550 restaurants in China in 2008)
By Lisa Baertlein
LOS ANGELES (Reuters) - Yum Brands Inc (YUM.N) can hit its target for 15 to 20 percent profit growth in China without unusually strong sales at established restaurants, an executive for the parent of KFC, Taco Bell and Pizza Hut said on Wednesday.
“We can get these numbers without heroic sales performance” at existing restaurants in China, Yum CFO Rick Carucci said on a Webcast from the company’s analyst meeting.
Yum, which plans to add 550 restaurants in China this year and build another 500 in 2009, is banking on new stores to deliver the majority of that country’s profit growth in 2009.
Sales at established China stores were up 12 percent in 2007 and growth is expected to slow to an increase of 8 percent this year.
The company is forecasting same-store sales growth of 5 percent for China in 2009, as a global credit crisis is expected to cool China’s economic growth into the single digits for the first time since 2002.
Last week, Yum said same-store sales in mainland China were running at around 4 percent growth for the current fourth quarter.
“We’re still not sure how China’s going to respond to a slowing economy,” Carucci said.
While it has recently struggled to grow in the United States, Yum has wrung big profits from China — one of the world’s fastest growing economies — and other international markets.
The Louisville, Kentucky-based company operates nearly 2,400 KFC restaurants in China, where it is one of the strongest imported brands.
Yum is in a race with rivals like McDonald’s Corp (MCD.N) to nab high-profile sites in China, where the company hopes to begin striking deals with franchisees.
The company is expanding its Pizza Hut Home Service while trimming plans for new Pizza Hut sit-down restaurants in major Chinese cities. It is also building a new Chinese food chain called East Dawning.
Yum expects overall profit growth to slow from 15 percent in 2007 to an estimated 12 percent in 2008 to at least 10 percent in 2009 — when it plans to build as many as 500 China restaurants and 900 more in other international markets.
Executives said half of Yum’s 2009 profit growth is already in place with the addition of 1,445 new overseas restaurants in 2008 and a plan to cut U.S. operating costs by $60 million from this year’s levels. While ingredient cost increases are expected to ease, foreign-exchange rates are expected to turn against the company.
Shares in Yum, which hit a year-high of $41.73 in April, were up 5.7 percent to $29.64 in late trade on the New York Stock Exchange.
Reporting by Lisa Baertlein, editing by Gerald E. McCormick