KFC, Pizza Hut, Taco Bell owner: China sales will improve

The food giant that owns the Pizza Hut, KFC and Taco Bell brands said Thursday it can deliver strong profits to shareholders after it splits into two publicly traded companies despite setbacks in China.

Yum Brands (YUM) on Thursday said that the two entities it plans to form following its split — a company focused on China and a company focused on the rest of the world — will each deliver a 15% annual return-on-investment, including earnings plus dividend income, beginning in 2017.

"We believe this transaction is a classic example of ‘one plus one equaling more than two’ as it will enable each company to realize its full potential and achieve greater value on a standalone basis," Yum Brands CEO Greg Creed said in a statement.

The company also announced that it would return $6.2 billion to shareholders before finishing the split at the end of 2016.

U.S. stores have "significant headroom" for sales growth, Yum Brands said.

Investors weren't enthused. The company's stock fell 2% in early trading Thursday to $72.09.

The Yum China division is poised to triple the number of restaurants "over the long term," Yum Brands said. That comes as the company is still recovering from quality concerns related to food-safety incidents for KFC in China.

Yum Brands had 4,828 KFC stores in China as of the end of 2014, making China the brand's largest market, as well as 1,572 Pizza Hut locations.

Sales at China stores open at least a year fell 3% in November, compared to a year earlier, though the company expects growth of 0% to 4% for the fourth quarter.

In its final year as part of Yum Brands, the China division is expected to post a 10% operating profit in 2016, the company projected.

Although it will be separate, Yum China will still provide 3% of its sales to Yum Brands.

Follow Paste BN reporter Nathan Bomey on Twitter @NathanBomey.