Yum Brands reported an adjusted result of 82 cents per share, which exceeds analysts’ expectations of 81 cents per share.
The company’s revenue of $ 1.25 billion was in line with estimates. The fast food conglomerate owns Taco Bell, KFC and Pizza Hut.
Yum Brands reported first quarter earnings on Wednesday, which exceeded Wall Street expectations, but weaker than expected growth in store sales at Taco Bell and Pizza Hut disappointed investors. The shares of the company initially rose less than 1% in the pre-market trading before turning back and falling by more than 3% after the market opened. The stock, which has a market value of $ 30.92 billion, has increased by around 10% this year.
“The results for the first quarter were a solid start to the year, due to exceptional strength at the KFC division and Taco Bell US,” said CEO Greg Creed in a statement. “With this quarter, we have a sound basis to help us meet our 2019 guidelines.” This is what the company reported compared to what Wall Street was expecting, based on an analyst survey by Refinitiv:
On an unadjusted basis, Yum’s net result slid 39% to $ 262 million, or 83 cents per share, from $ 433 million, or $ 1.27 per share, a year earlier. Yum’s interest of approximately 3% in Grubhub abolished 5 cents per share from his earnings during the quarter. Excluding revaluable earnings, a tax charge on special items and other items, Yum earned 82 cents per share, which exceeds the 81 cents per share that analysts expect from Refinitiv.
The company was able to increase its operating margin for all three brands, making more profit possible. It attributes that profit to the revenue growth in the same stores, as well as to the profit from its refranchising initiative. Of all three of its brands, Yum has sold thousands of franchisers to save costs. Net sales decreased 9% to $ 1.25 billion, in line with expectations. The company reported worldwide revenue growth of 4%, against Wall Street expectations of 2.66%.
Taco Bell sales growth in the same store with 4% missed expectations of 4.47%. The maker of the Quesarito has long been the striking feature of Yum’s brands, but the company is trying to speed up sales even further by pushing them into new international markets. Creed told analysts during the conference call that the sales growth of the international division lagged behind that of his home market. Taco Bell opened 12 new international stores during the quarter.
Taco Bell has also rolled out delivery to more than 4,000 of its locations in the United States. Executives would not share specific data, but said they saw benefits for both traffic and ticket. Sales at Pizza Hut stores that were open for at least a year were flat during the quarter, while Wall Street expected a bite of about half a percentage point. The laggard of Yum Brands has lost market share because it is difficult to win new customers. In the United States, the largest market, sales fell by 1%.
KFC, which accounts for the majority of Yum’s sales, reported a sales increase of 5% compared to the same store, with estimates of 2.74%. This quarter, the brand faces disappointing results from last year, when a chicken shortage in the UK worsened sales. Sales in China, where more than a quarter of sales now come from, increased by 11%. Yum China, Yum’s spin-off of its Chinese activities, owns those stores.
Yum opened 310 net new stores during the quarter ending March 31.
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