Earnings

Strong dollar weighs on Yum Brands even as sales rise at KFC and Taco Bell

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Signage is displayed outside a Yum! Brands Inc. Taco Bell and Kentucky Fried Chicken (KFC) restaurant in Louisville, Kentucky, U.S., on Thursday, Jan. 30, 2020.
Luke Sharrett | Bloomberg | Getty Images

Yum Brands on Wednesday reported quarterly earnings that missed analysts’ expectations as the strong U.S. dollar weighed on its results.

Revenue came in above expectations, however, as same-store sales rose at its KFC, Pizza Hut and Taco Bell chains. Yum executives said that consumers generally haven’t been changing their behavior, and that more premium menu items in the U.S. are proving popular.

Other restaurant companies, including McDonald’s and Chipotle Mexican Grill, have reported a pullback in spending from lower-income customers. Yum noted a a similar effect in the United Kingdom, where it said demand for KFC and Pizza Hut is lagging, largely due to higher energy costs.

Shares of the company rose 1.5% in premarket trading.

Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

  • Earnings per share: $1.09 adjusted vs. $1.14 expected
  • Revenue: $1.64 billion vs. $1.62 billion expected

Net sales rose 2% to $1.64 billion. Worldwide, Yum’s same-store sales increased 5% in the quarter, topping StreetAccount estimates of 2.5%. More than 40% of Yum’s transactions came from digital channels, like its mobile app.

KFC reported same-store sales growth of 7%, beating Wall Street’s estimates of 2%. Excluding China, its largest market, same-store sales climbed 9%.

In the U.S., the fried chicken chain brought back its $5 Mac and Cheese Bowls, helping drive domestic same-store sales growth of 2%.

In October, Yum announced it reached a deal to sell its Russian KFC restaurants to a local operator, allowing it to fully exit the country.

Taco Bell’s same-store sales rose 6% in the quarter, falling short of expectations of 7.5%. In the U.S., same-store sales rose 7%. The Mexican-inspired chain is typically the strongest performer in Yum’s portfolio.

“As we enter the fourth quarter, we’re even more excited about the momentum in Taco Bell U.S. with the relaunch of the Mexican pizza, which occurred in mid-September,” Yum CEO David Gibbs said.

Pizza Hut reported same-store sales growth of 1%, beating Wall Street’s projections that its same-store sales would decline. The pizza chain has been struggling to stage a comeback for years. Demand for pizza delivery during the pandemic helped boost sales, but has since waned with people going out more again.

For the quarter ended Sept. 30, Yum reported a net income of $331 million, or $1.14 per share, down from $528 million, or $1.75 per share, a year earlier. The company said foreign currency rates weighed on its earnings per share by 10 cents.

Excluding Russian profits, lower investment gains and other items, the restaurant company earned $1.09 per share.

The company plans to hold an investor day on Dec. 13 in New York City.

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