Yum! Brands to focus on delivery, new technology and growth

Feb. 8, 2019

Yum! Brands reported significant progress on its efforts to transform the fast-food chain for the shared economy during the fourth-quarter, as it forged ahead with efforts to implement on-demand food delivery, according to its quarterly earnings report.

The company, which launched nationwide delivery from GrubHub at 4,000 Taco Bell restaurants, said it plans to install kiosks at 5,000 of its KFC restaurants and 70 of its locations offering delivery by the end of 2020.

The company has 12 million active users in its Hut Rewards loyalty program for Pizza Hut and is looking to add more. The chain announced during the quarter that in-store dining will now earn rewards as well.

Yum Brands also reported strong gains in its growth strategy, opening 3,021 gross restaurants, and 1,758 on a net basis, excluding Telepizza.

"This is truly a step change in pace, representing an approximately 50 percent increase in net new growth from 2016," said David Gibbs, president and COO of the company, in a conference call with analysts.

Gibbs, a 29-year veteran and former president and CFO of the company, was promoted to president and COO late last month. He will retain the CFO responsibilities until a new CFO is named. 

The Louisville, Kentucky-based QSR, reported 6 percent growth in same-store sales at its Taco Bell restaurants during the quarter , while KFC showed a 3 percent increase and Pizza Hut U.S. reported a modest 1 percent gain.

KFC reported systemwide sales growth of 7 percent and 5 percent new unit growth for the quarter and the year, led by better-than-expected demand in overseas markets, including China, Russia, the rest of Asia, Latin America and central and Eastern Europe, officials said on a conference call with analysts. Strong sales in Africa, China and Iberia boosted fourth quarter demand.

The Pizza Hut division reported flat same-store sales in the quarter, a 2 percent gain in systemwide sales and net unit growth of 10 percent, however, that excluded gains in its Telepizza business, leaving only 2 percent growth without those gains.

Creed noted on the call that the company previously referenced foundational improvements in that business, but remain dissatisfied with sales in that part of the business.

"For both the U.S. 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," he told analysts.

He noted that a gap of about 10 percent exists between dine-in sales and off-premises sales, as 40 percent of the international units are dine-in and said the company had success with its off-premises businesses, particularly Delcos, fast-casual Delcos and express units.

Gibbs told analysts that Pizza Hut will likely be transitioning to a more delivery focused business from a dine-in business, which would impact openings and closings over the year.

The company reported strong results from Taco Bell, as same-store sales grew for a seventh consecutive year, outpacing the industry, while fourth-quarter system sales increased by 9 percent.

As previously reported, Taco Bell announced its nationwide rollout of delivery with Grubhub at more than 4,000 restaurants in the U.S.

Yum Brands reported fourth-quarter earnings fell 17 percent on a per-share basis, to $334 million, or $1.04 a share in the quarter, compared with $436 million, or $1.26 a share in the year-ago quarter.

Excluding special items, earnings fell 58 percent to 40 cents a share, in the fourth quarter.

Revenue fell 1 percent in the quarter to $1.56 billion, compared with $1.58 billion in the year-ago period.


Topics: Mobile Payments, Restaurants

Companies: KFC, Taco Bell, Yum! Brands, Pizza Hut

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