Yum Brands Inc., which thrives on budget diners at its Pizza Hut, KFC and Taco Bell chains, will increase menu prices this year in various parts of the world in response to rapidly rising food costs.
The pricing plan, which will be implemented in varying stages, follows on the company’s strong fourth-quarter results posted Monday and positive 2012 outlook, instilling confidence among investors who may have been concerned about Yum’s momentum given its high exposure to volatile emerging markets. The stock rose 2.75%, to $64.93 in Tuesday trading–marking a 10% rise so far this year.
Yum’s restaurants in China–namely Pizza Hut Casual Dining and KFC–have the biggest impact on its overall business, helping increase its profits 30% in the fourth quarter. However, food and labor inflation are nibbling away at its China restaurant margins, which fell to 15.8% in the quarter from 18.2% the year before, despite menu price increases.