Yum Brands on Tuesday reported earnings that beat expectations, but a cyclospora outbreak linked to iceberg lettuce at Taco Bell weighed on the company’s same-store sales growth.
However, Yum said Taco Bell, which the company considers a “growth engine” for its business, has since rebounded.
“Since the end of September, Taco Bell U.S. has been outpacing the [quick-service restaurant] industry on same-store sales growth,” Yum CEO Chris Turner said in a statement.
Taco Bell’s same-store sales are up about 1% so far in the fourth quarter, CFO Ranjith Roy said on the company’s earnings conference call Tuesday. In the last four weeks ended Friday, same-store sales have risen 3% compared with the year-ago period.
Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by LSEG:
- Earnings per share: $1.56 adjusted vs. $1.49 expected
- Revenue: $2.05 billion vs. $2.05 billion expected
Yum reported fiscal third-quarter net income of $1.62 billion, or $5.92 per share, up from $397 million, or $1.41 per share, a year earlier.
Excluding gains from its divestiture of Pizza Hut and other items, the restaurant company earned $1.56 per share.
Net sales rose 4% to $2.05 billion.
During the quarter, Yum completed its divestiture of Pizza Hut. It closed the sale of the pizza chain’s business in mainland China to Yum China on Aug. 7 and sold the rest of Pizza Hut to LongRange Capital on Sept. 1. The company’s third-quarter results include Pizza Hut up until those dates.
Excluding Pizza Hut, Yum’s same-store sales were flat for the quarter as Taco Bell weighed on the company’s overall results. Taco Bell’s same-store sales declined by 4% as diners temporarily pulled back on visits due to the foodborne illness outbreak.
Yum executives previously said the weekend of July 18 saw the most severe impact to sales, but trends have improved since then.
Taco Bell’s most loyal customers returned faster, Yum said, thanks in part to weekly Tuesday deals for loyalty program members after the cyclospora outbreak took over headlines.
Traffic from “medium” and “light” customers has bounced back to about 95% of prior levels, while visits from “heavy” users is back to normal, Roy said. To attract more casual diners, Taco Bell has been relying on star power, like a collaboration with pop star Olivia Rodrigo on a pink-colored Mountain Dew Baja Blast.
Outside of the U.S., Taco Bell’s much smaller international business reported same-store sales growth of 5%.
KFC’s same-store sales ticked up 1%, helped by system sales growth in China and Europe. The U.S., now the chicken chain’s third-largest market, saw system sales shrink 6% in the quarter.
Like Restaurant Brands International’s Popeyes, KFC has struggled in the U.S. amid a wave of new competitors and more budget-conscious consumers. Its home market represents only about 5% of KFC’s operating profit, but it remains a symbolically important part of the business for Yum investors.
During the quarter, KFC U.S. launched popcorn chicken, which sold out in many restaurants. However, Yum said the limited-time menu item was not enough to offset the successful Hot & Spicy Wings and Potato Wedges promotion during the year-ago period.
Globally, KFC is trying to become “the most modern chicken QSR,” Turner said on the company’s earnings conference call. To achieve that lofty goal, he said the chain will roll out buzzy promotions, a new brand identity, and a wider menu that includes upgraded sauces and more beverages.
www.cnbc.com