- Earnings beat, sales matched. Yum Brands reported adjusted earnings of $1.56 a share against the $1.49 analysts polled by LSEG expected, on revenue of $2.05 billion, in line with estimates. Net sales rose 4%.
- Taco Bell took the hit. A cyclospora outbreak linked to iceberg lettuce at Taco Bell restaurants drove the chain’s same-store sales down 4% as diners temporarily cut back visits. Excluding Pizza Hut, Yum’s same-store sales were flat for the quarter.
- The rebound has started. Taco Bell same-store sales are up about 1% so far in the fourth quarter and rose 3% over the four weeks ended Friday, CFO Ranjith Roy said. Traffic from “medium” and “light” customers is back to about 95% of prior levels, while “heavy” users have returned to normal.
- KFC is struggling at home. KFC’s same-store sales rose 1%, helped by China and Europe, but US system sales shrank 6% amid new competitors and budget-conscious consumers. The US now represents only about 5% of KFC’s operating profit.
What Happened?
Yum reported third-quarter net income of $1.62 billion, or $5.92 a share, up from $397 million, or $1.41 a share, a year earlier, reflecting gains from the Pizza Hut divestiture; excluding those and other items, it earned $1.56 a share. During the quarter Yum sold Pizza Hut’s mainland China business to Yum China on Aug. 7 and the rest of Pizza Hut to LongRange Capital on Sept. 1. “Since the end of September, Taco Bell U.S. has been outpacing the [quick-service restaurant] industry on same-store sales growth,” CEO Chris Turner said.
Why It Matters?
Taco Bell is the company’s “growth engine,” so the speed of its recovery matters more than the headline beat. Yum said its most loyal customers came back faster, helped by weekly Tuesday deals for loyalty members, and it is using celebrity tie-ins such as a collaboration with Olivia Rodrigo to win back casual diners. Outside the US, Taco Bell’s smaller international business grew same-store sales 5%. KFC’s US weakness mirrors struggles at rivals such as Restaurant Brands International’s Popeyes amid a wave of new competitors and more budget-conscious consumers.
What’s Next?
Investors will watch whether Taco Bell’s fourth-quarter rebound holds and pulls in more casual customers. At KFC, Turner wants the chain to become “the most modern chicken QSR,” with a new brand identity, buzzy promotions and a wider menu including upgraded sauces and more beverages. With Pizza Hut gone, Yum’s results now depend more heavily on Taco Bell and KFC.
Affected Tickers and Coins: YUM, YUMC, QSR
Source: CNBC
