Taco Bell, KFC boost results for YUM!

By Nick Hall | 01 Nov 2018 View comments

YUM! Brands Inc., the franchise group behind global chains KFC, Pizza Hut and Taco Bell has announced positive sales performance in its Q3 results, maintaining full-year guidance.

The results follow a collective effort from YUM! to refranchise 134 restaurants in the network, a move that netted refranchising gains of $100m in Special Terms.

Greg Creed, YUM! CEO said the latest results demonstrated the group’s commitment to providing a sustainable and efficient working model for its global franchise partners.

“We are pleased to deliver third-quarter system sales growth of five per cent, consisting of same store sales growth of two per cent and net new unit growth of four per cent. Core operating profit growth of two per cent was consistent with our expectations,” Creed said.

“We are now two years into our three year transformation and remain firmly on-track to becoming more focused, more franchised and more efficient. The collective power of our three iconic brands, anchored by our four key growth drivers, is helping us deliver long-term sustainable growth and higher returns for our stakeholders.”

The five per cent increase in the network’s global system sales was bolstered by strong performances from KFC and Taco Bell, which reported seven per cent growth and eight per cent growth respectively.

Taco Bell also performed well in regard to same-store sales growth (SSS), announcing a five per cent lift in SSS, generating a solid 10 per cent rise in operating profit.

Neil Saunders, managing director of GlobalData Retail said Taco Bell’s strong results were a reflection of targeting marketing and diversification of offering.

“The ongoing success of Taco Bell is largely down to effective marketing and high levels of menu innovation,” Saunders said.

“Low price points across a number of items encouraged more testing of new items by diners. In terms of marketing, Taco Bell as made a considerable effort to connect with younger millennial consumers through social media, including on Instagram. This allows it to advertise and promote itself, and its products, in a way that is both fast and cost-effective.”

For stablemate KFC, growth was primarily boosted by international operations, including a strong showing from European and Middle-Eastern outlets, with the franchise announcing a Net-New Unit Growth of 266 sites.

“Both of these groups have made significant investments in staff training, which is translating into both a customer friendly and highly efficient culture in stores,” Saunders said.

As expected, strong competition in the global pizza market returned flat results for Pizza Hut, including a one per cent decline in the U.S.

“One of the big issues for Pizza Hut is that among younger age segments – especially students – it plays third fiddle behind Domino’s and even troubled Papa John’s,” Saunders said.

“This is one of the reasons why the chain has focused so much on digital initiatives, in an attempt to better connect with this cohort, which is still driving much of the market growth. In our view, it will likely be disappointed, mainly because the success of other chains isn’t just about digital – it’s about brand perception, physical location, and price.”

The latest Q3 results also see YUM!’s net income rise by 8.6 per cent, to $454m, culminating in a 4.5 per cent boost in the company’s share price.