YUM! Brands Inc. (YUM) Reorganizes Business Units


Louisville, Kentucky-based restaurant giant, Yum! Brands Inc. (YUMAnalyst Report) recently announced a complete restructuring of its business divisions. According to the reshuffling, the company will be merging its Yum! Restaurants International (YRI) and the U.S. divisions for each of its three brands — KFC, Pizza Hut and Taco Bell.

However, the company will continue to operate its other two divisions — Yum! Restaurants China and Yum! Restaurants India — separately on expectations of potential growth. This reorganization is an attempt by the Yum! Brands to improve its brand recognition and concentrate on individual geographical markets, thus boosting its business.

These structural changes are expected to take effect from Jan 1, 2014. From the beginning of fiscal 2014, Yum! Brands will be posting its financial results for the following divisions — KFC, Pizza Hut, Taco Bell, Yum! Restaurants China and Yum! Restaurants India. The company will no longer be providing separate results for the U.S. and YRI divisions.

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As part of the realignment, Yum! Brands also announced few executive changes. Rick Carucci, the President of Yum! Brands, will step down in Mar 2014.

Niren Chaudhary — President of Yum! Restaurants India — and Sam Su — vice chairman of Yum! Brands and chairman as well as Chief Executive Officer (CEO) of Yum! Restaurants China — will be reporting to David C. Novak — CEO of Yum! Brands. Additionally, the CEOs of all the three brands will now be directly working under Novak. These leadership changes are in line with YUM! Brands’ focus on streamlining its organizational structure.

YUM! Brands’ initiative to restructure its business comes in the wake of witnessing disappointing financial results for the past few quarters due to weak performance in its China division. China, which once played a pivotal role in the company’s growth story, began to falter after fourth-quarter 2012 due to bad publicity resulting from the quality issue. Moreover, poor sales performance at KFC China in September compelled YUM! Brands to state that the China comps will continue to be down in the fourth quarter.

Other Stocks to Consider

YUM! Brands has a Zacks Rank #4 (Sell). Investors interested in the restaurant industry may consider stocks like Cracker Barrel Old Country Store, Inc. (CBRLSnapshot Report), DineEquity, Inc. (DINSnapshot Report) and Bob Evans Farms, Inc. (BOBESnapshot Report). All these companies hold a Zacks Rank #2 (Buy).

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