Signage is displayed outside a Yum! Brands Inc. Taco Bell and Kentucky Fried Chicken (KFC) restaurant in Louisville, Kentucky, U.S., on Thursday, Jan. 30, 2020.
Luke Sharrett | Bloomberg | Getty Images
Yum Brands on Tuesday reported quarterly earnings and revenue growth, fueled by strong demand for Taco Bell and improved U.S. sales for KFC.
The restaurant company also announced plans to review strategic options for Pizza Hut. The embattled pizza chain has struggled to win over diners in recent years. In its home market, pizza fatigue after pandemic lockdowns have led to slumping sales, and rivals like Domino’s Pizza have taken share from Pizza Hut.
“We believe a different approach, including but not limited to, a sale of the business, would allow Pizza Hut to realize its full potential,” CEO Chris Turner said on the company’s conference call.
Yum shares gained 5% in early trading.
Here’s what Yum reported compared with what Wall Street was expecting, based on a survey of analysts by LSEG:
Earnings per share: $1.58 adjusted. May not compare to $1.49 expected.Revenue: $1.98 billion vs. $1.97 billion expected
Yum reported third-quarter net income of $397 million, or $1.41 per share, up from $382 million, or $1.35 per share, a year earlier.
Excluding the cost of its strategic review of Pizza Hut and other items, the company earned $1.58 per share.
Net sales rose 8% to $1.98 billion.
Yum’s digital sales, which include mobile, delivery and kiosk orders, reached $10 billion systemwide and accounted for roughly 60% of orders.
The company’s same-store sales increased 3%, lifted by Taco Bell and KFC.
Taco Bell’s same-store sales climbed 7% in the quarter, topping analyst estimates of 5.2% growth, according to StreetAccount. While other fast-food chains have seen their sales slump, the Mexican-inspired chain has bucked the trend. Its value perception, even among pinched low-income diners, and buzzy menu innovation have helped Taco Bell grow sales.
“We’re not seeing consumer pull back in the Taco Bell business,” Turner said. “We do think the consumer in the U.S. is cautious, but incredibly resilient.”
Yum announced it is buying 128 Taco Bell locations in the Southeast U.S. The company franchises about 98% of its restaurants
KFC reported same-store sales growth of 3%, beating StreetAccount estimates of 2.4%. In China, the brand’s largest market, system sales rose 6%.
And in the U.S., where it has lost market share to new players like Raising Cane’s, KFC’s same-store sales increased 2%.
Turner credited the strength of KFC to new leadership of Catherine Tan-Gillespie, who took over as U.S. president of the chain in April. Under Tan-Gillespie, KFC’s U.S. business has changed its marketing tactics and introduced spicy wings.
“Early days on the turnaround, but we’re pleased with the green shoots,” Turner said.
Only Pizza Hut saw same-store sales declines. The struggling pizza chain reported same-store sales fell 1% in the quarter, fueled by a 7% drop in sales at U.S. restaurants open at least a year. Analysts surveyed by StreetAccount were projecting same-store sales declines of just 0.3%.
“We remain focused on strengthening business performance,” Yum CFO Ranjith Roy said on the company’s conference call. “That said, as we prepare the business for a potential transaction, our Q4 results may see some impact from actions involving isolated franchisee situations.”
For example, Pizza Hut’s U.K. operator DC London Pie Limited fell into insolvency in October, leading to at least 68 store closures.
