August 1, 2019 / 11:27 AM / 4 months ago

Yum Brands posts earnings beat on KFC boost, Pizza Hut rebound

(Reuters) - Yum Brands Inc (YUM.N) beat expectations for quarterly profit on Thursday, as menu refreshes and a delivery push drove better-than-expected growth at all of the restaurant operator’s chains, including Pizza Hut, sending its shares to a record high.

FILE PHOTO: Delivery motorbikes line up in front of a Pizza Hut restaurant in Nice, France, June 5, 2018. REUTERS/Eric Gaillard/File Photo

U.S. restaurant chains are focusing on mobile ordering and pickup services, while sprucing up their menu by adding more value meals and fresher ingredients to compete better in a crowded restaurant industry.

Yum picked up a stake in GrubHub Inc (GRUB.N) last year and bought online ordering software company QuikOrder in hopes of wooing customers looking for easier options to order in.

The company’s efforts paid off in the quarter. Pizza Hut, a weak spot for the company in the past few years, grew for the first time in five quarters, while same-store sales at KFC and Taco Bell rose the most in over a year.

“While it’s still early days, we found that the GrubHub customers are incremental and some customers are, therefore, trying our (Pizza Hut) products for the first time,” Chief Executive Officer Greg Creed said.

Pizza Hut currently uses GrubHub’s delivery services at over 300 location, with plans to expand further; while KFC has 2,300 outlets offering delivery and 3,500 restaurants that offer “click and collect”.

Creed said the company would close underperforming dine-in Pizza Hut locations to sharpen its focus on delivery and takeaway.

Overall, the company’s sales from restaurants open at least a year rose 5%, beating Wall Street expectations as Taco Bell and KFC grew 7% and 6% respectively.

For interactive graphic, click link: (tmsnrt.rs/2ytZgLh)

At KFC, growth was driven by its 2 for $6 mix-and-match menu and the return of its popular chicken and waffles to the U.S. menu, while items catered to regional tastes such as the ‘Wrapsta Lunchbox’ value promotion in Africa helped KFC deliver stronger international results.

At Taco Bell, value boxes drove growth in India, UK and Spain, the company said.

“(Results a) confirmation that Yum’s stable, high-returning franchise growth algorithm is very much intact,” Bernstein analyst Sara Senatore said.

Excluding items, the company earned 93 cents per share in the second quarter ended June 30, trouncing expectations by 6 cents. While total revenue of $1.31 billion also beat expectations.

Shares of the Louisville, Kentucky-based company rose as much as 6.3% to $119.7. They have risen 22% so far this year.

(This story corrects paragraph 10 to say ‘Wrapsta Lunchbox’)

Reporting by Aishwarya Venugopal and Nivedita Balu in Bengaluru; Editing by Bernard Orr, Anil D'Silva and Sweta Singh

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