Yum Brands Profit Misses As Pizza Hut Promotions Weigh
Yum Brands Inc has missed analysts' estimates for quarterly profit, as the fast-food chain operator spent aggressively to revive sluggish traffic at Pizza Hut.
Stiff competition from Domino's Pizza Inc and Papa John's International Inc has led to a stagnation in same-store sales at Pizza Hut in the past year and Yum has fought back through a slew of promotions.
Still, US same-store sales at Pizza Hut rose only 1% in the fourth quarter. Operating margins at the business fell to 33.1% from 38.8% in the latest reported quarter.
"For both the US and international business, sustainable improvements in sales growth will remain a slow build as we update and reposition the asset base and make the messaging more distinctive," CEO Greg Creed said on a conference call.
Meanwhile, Taco Bell, the company's fastest-growing brand, recorded its strongest growth in same-restaurant sales in seven quarters.
Worldwide same-store sales rose 6% at Taco Bell, easily topping expectations of a 4.35% increase, according to Refinitiv estimates.
Yum has been taking the US-centered Taco Bell's burrito and tacos menu overseas to replicate the success with its KFC business. This weighed on the unit's operating margins, which dipped to 31.9% from 33.6% in the quarter.
Strong sales at KFC and Taco Bell helped drive the company's global comparable store sales up 3%, topping estimates of 2.48%.
The company's net income fell 23% to $334 million in the three months that ended on December 31, 2018. Excluding one-time items, Yum earned 40 cents per share, widely missing estimate of 95 cents.
Total revenue fell 1% to $1.56 billion, also missing expectations of $1.59 billion.