Yum! Brands Inc. (NYSE:YUM) stock rose Thursday after the company reported mixed second-quarter results, with adjusted earnings topping Wall Street estimates while revenue fell short.
Yum! Brands Earnings Beat, Revenue Miss
Adjusted earnings came in at $1.62 per share, beating the analyst consensus estimate of $1.58. Revenue totaled $2.17 billion, below analysts’ estimate of $2.20 billion.
Worldwide system sales increased 5%, excluding currency effects, while the company expanded its restaurant count by 5% with 1,053 gross new units.
GAAP operating profit rose 5%, while core operating profit increased 5%. Digital system sales approached $9 billion, with digital orders accounting for more than 60% of system sales.
KFC opened 660 gross new restaurants across 55 countries during the quarter. Pizza Hut opened 333 locations across 33 countries, while Taco Bell added 54 restaurants across 15 countries.
Taco Bell Sales Recover After Outbreak
Yum! Brands said Taco Bell continues to recover from a cyclospora outbreak linked to lettuce supplied by a vendor, though the incident weighed on current-quarter sales.
Chief Executive Officer Chris Turner said the outbreak caused a meaningful short-term decline in sales but expects the impact to be temporary. Through July 27, Taco Bell’s U.S. same-store sales were down 2% in the third quarter to date, CNBC reported Thursday.
Chief Financial Officer Ranjith Roy said sales experienced the sharpest decline during the weekend of July 18, shortly after the outbreak drew widespread attention.
Turner said sales trends have improved steadily over the past 10 days as consumers increasingly recognize the outbreak as an industrywide issue rather than one specific to Taco Bell.
Roy said average sales during the most recent four days had recovered about half of the initial decline following the announcement.
Growth Strategy And Outlook
Taco Bell remained Yum! Brands’ strongest-performing brand during the second quarter, with same-store sales increasing 7%.
Turner said Taco Bell’s social media sentiment has returned to pre-outbreak levels. He also said the chain’s $1 Mexican Pizza promotion generated record Tuesday app traffic, transactions and loyalty sign-ups, Bloomberg reported Thursday.
Companywide, Yum! Brands reported 3% comparable sales growth, matching analyst expectations. KFC posted 2% same-store sales growth.
Turner said Yum! Brands signed definitive agreements with two buyers for the Pizza Hut business, concluding its strategic review. He said the company will become a more focused organization with priorities that include strengthening consumer relevance, improving restaurant economics, expanding adoption of Byte by Yum! and maintaining disciplined capital allocation.
Yum! Brands Outlook
Yum! Brands reaffirmed its long-term targets of approximately 5% annual unit growth and 7% system sales growth, excluding currency effects.
The company also reiterated its goal of delivering at least 8% long-term core operating profit growth.
YUM Price Action: Yum! Brands shares were up 3.86% at $161.99 at the time of publication on Thursday, according to Benzinga Pro data.
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