Yum Beats Expectations On KFC Growth, Taco Bell Weighs
Yum Brands Inc has reported quarterly earnings and same-store sales above Wall Street estimates as KFC recorded its best growth in three years, but weaker-than-expected growth at Taco Bell weighed on the company's shares.
Taco Bell recorded the slowest growth in same-store sales in three quarters and missed analysts' expectations, as the restaurant chain competes for customers in a crowded fast-food market.
"Not A Big Point Of Differentiation"
"They [offer] cheap, inexpensive food and the demand is still there. But it is not a big point of differentiation. You could go to a [convenience] store and get the same thing," said Tim Powell, a restaurant analyst at Chicago-based Q1 Consulting.
The Mexican-inspired chain has been a major growth driver for Yum Brands in the past two quarters, riding on the popularity of its value meals.
The restaurant chain has also expanded its delivery in the United States, making the most of Yum Brands' investments in GrubHub Inc.
But Taco Bell's same-store sales rose 4% in the latest quarter, falling short of the 4.47% estimated by analysts, according to IBES estimates from Refinitiv.
Edward Jones analyst Brian Yarbrough said expectations for growth in Taco Bell were high going into the quarter and the slight miss in same-store sales could be pulling down Yum Brands shares.
Same-store sales at Pizza Hut also fell short of expectations in the face of intense competition from local pizzerias and chains like Domino's Pizza Inc.
Highlight Of The Quarter
The highlight of the quarter was KFC, which reported a better-than-expected 5 percent rise in sales at established restaurants, boosted by growth in its international markets, including Indonesia and Japan.
Yum has been aggressively expanding its KFC restaurants, opening 372 new restaurants in 46 countries in the first quarter.
"Operational enhancements, such as a new menu board design and delivery through GrubHub each positively contributed to first-quarter sales," CEO Greg Creed said on a post-earnings call.
Share Earnings And Net Income
Excluding one-time items, Yum earned 82 cents per share, one cent above the average estimate.
Yum's net income fell about 40% to $262 million in the three months that ended on March 31, partly due to its investments in food delivery service GrubHub.