Yum Brands Shares Fall After Quarterly Results are Mixed

Yum Brands, Inc. posted mixed numbers for its first quarter Wednesday sending shares down by 4%. Yum’s strong revenue as well as earnings for the first quarter were positives for its investors, but sales growth in same-restaurants disappointed them.

Yum Brands, which include KFC, Pizza Hut and Taco Bell, posted adjusted per share earnings for the first quarter of 90 cents, while revenue ended at $1.37 billion. Both topped estimates by analysts of 68 cents in earnings and revenue of $1.09 billion.

However its sales growth for same-restaurants was only 1%, missing an estimate of 1.9% and far short of the growth of 5.5% its rival in the fast-food war McDonald’s posted earlier in the week.

The highest growth company at Yum, KFC reported growth in same-restaurant sales of 2% in comparison to estimates of 2.6%. KFC ended with an operating margin of 33.6% which increased by 5.3%.

Taco Bell posted sales growth for same-restaurants of 1% which beat estimates that were 0.8%, while operating margin fell to 28.5% or a drop of 2.7%.

Pizza Hut was the big disappointment of the three posting sale growth for same-restaurants of 1% while estimates on Wall Street were for 1.9%, and operating margin dropped 0.6% to 35%.

Yum opened another 239 locations during the quarter, which was up 3% and it reported share buybacks of $528 million. Yum CEO Greg Creed, through a prepared statement said that the company began its second year of its transformation and is pleased with its progress towards becoming a more franchised, more efficient and more focused company.

The CEO added that the company was keeping all of its full year aspects for guidance in 2018 and remained confident that its transformation was building a strong foundation for growth in the long term.

Yum Brands had previously released guidance for its 2018 full year same restaurant sales growth of between 2% and 3% and net unit growth of 3% to 4% with core operating growth in profit being flat.

One analyst said he believes that Yum Brands developed into one of the quick services restaurant industry’s best innovators and expects that the new expansion, production development and mobile engagement efforts, as well as its new delivery partnership entered into with Grubhub will continue to drive sales growth system wide.

Leave a Reply