(Adds details on cost cuts, executive comment)
By Lisa Baertlein
Oct 11 Yum Brands Inc, owner of Pizza
Hut, KFC and Taco Bell chains, said on Tuesday it will more than
double returns to shareholders by 2019 as part of a program
started last year, sending its shares up as much as 3.8 percent.
The company, which is spinning off its China division at the
end of the month, now plans to expand its share buyback plan to
$13.5 billion, including dividends.
It already has bought back about $5.5 billion shares as part
of a previously announced $6.2 billion capital return program
that has reduced its share count by about 16 percent.
Yum did not immediately have a breakdown on much of the
extra returns would be from share repurchases and how much from
Executives say Yum Brands will be leaner and less exposed to
the ups and downs of the restaurant business following the
separation of Yum China and the sale of more company-owned
restaurants to franchisees.
"It's about delivering higher growth with lower risk," Yum
Brands Chief Executive Officer Greg Creed told Reuters in a
Yum said franchisees will own 93 percent of the nearly
36,000 Yum restaurants remaining in the company after the China
unit is carved off. The combined company currently is 77 percent
franchised, in part because Yum China owns most of its
Yum Brands aims to have at least 98 percent of its
restaurants owned by franchisees by the end of 2018, which will
lower costs and increase its dependence on more stable franchise
and license fees.
Yum's China business will begin trading on Nov. 1 on the New
York Stock Exchange with the ticker symbol YUMC. The new
company, Yum China Holdings Inc, will become a licensee of Yum
Brands in mainland China and will have exclusive rights there to
KFC, Pizza Hut and Taco Bell.
Yum China now accounts for 45 percent of Yum Brands'
earnings, a contribution expected to fall to 14 percent after
the spinoff, when Yum China will begin paying Yum Brands a
license fee of 3 percent of restaurant system sales, Creed said.
The company plans to reduce annual capital expenditures to
about $100 million in 2019 from about $500 million in 2015 and
cut general and administrative expenses by a cumulative $300
million by fiscal 2019.
About half of that $300 million in new savings will come
from shifting restaurant expenses to new franchisees, the
remainder will come from job eliminations and tighter expense
controls on things like travel, Creed said.
Yum last week reported its first same-store sales drop in
five quarters in China, blaming anti-U.S. protests after an
international court rejected China's claim to historic rights in
the South China Sea.
Shares in Yum were up 1.1 percent at $88.31 after hitting a
session high of $90.68. Up to Monday's close, the stock had
risen about 20 percent since the start of the year.
(Reporting by Lisa Baertlein, additional reporting by Siddharth
Cavale and Abhijith Ganapavaram in Bengaluru; Editing by Jeffrey
Benkoe and Andrew Hay)