Strength at Taco Bell, KFC helps Yum make best third quarter forecasts

Dee-ann Durbin, Editor for Business and Social Affairs

Update

10:11 AM CDT, Wednesday, October 31, 2018

Taco Bell's and KFC's better-than-expected results helped Yum Brands outperform Wall Street expectations in the third quarter.

But Pizza Hut remained a weak point in the company's balance sheet, with same-store sales growth in the United States, China and Europe.

Yum, based in Louisville, Kentucky, reported a profit up 8.6 percent to $ 454 million, or $ 1.40 a share. Excluding charges and special costs, Yum Brands earned $ 1.04 per share, exceeding analysts' expectations by 20 cents, according to FactSet.

Revenues fell 3% to $ 1.39 billion, but still outpaced Wall Street forecasts.

Yum shares rose 3.5% to 89.34 USD in the morning.

Global same-store sales, a key measure for retailers, increased 2%, which is in line with expectations. This increase is due to a 3% increase in sales at KFC and 5% at Taco Bell, two figures above expectations.

Yum Brands Inc. Chief Executive Officer Greg Creed said Taco Bell's success was based on product innovation, value for money and good publicity. During the summer, Taco Bell launched a duo burrito and two dollar drinks and reintroduced its popular Nacho Fries fries.

KFC has experienced significant growth abroad. Sales by store increased 25% in India and 22% in Russia and Eastern Europe between July and September, the company said.

At the same time, Pizza Hut's global same-store sales growth decreased 1% for the quarter.

In the United States, Pizza Hut continues to struggle with older dinner restaurants, where customers want more and more purchase and delivery. Dinner-in is only 10% of Pizza Hut's US sales.

The company is trying to convince franchisees to build new takeaways in busy locations, but it still has 3,000 dining restaurants in the US, said David Gibbs, President and Chief Financial Officer of Yum.

Creed said that delivery times, digital apps and rates are solid for Pizza Hut, but that the company needs to do a better job of spreading the word.

"We need to bring clarity to what we are delivering and doing now to new customers," he said.