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Woocommerce Category Post Widget
A customer rides his bike in front of a Taco Bell restaurant in Novato, California.
Justin Sullivan | Getty Images
Yum’s two other chains, Pizza Hut and KFC, missed Wall Street’s estimates for same-store sales growth.
Shares of the company dropped 9.7% in early 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: 80 cents, adjusted, vs. 94 cents expected
- Revenue: $1.339 billion vs. $1.344 billion expected
The company reported fiscal third-quarter net income of $255 million, or 81 cents per share, down from $454 million, or $1.40 per share, a year earlier.
Yum said that changing the fair value of its GrubHub investment dragged down earnings by 15 cents per share. Yum bought a 3% stake in the third-party delivery app last year as more national chains looked to lift sales by offering delivery. GrubHub has struggled this year as fierce competition with the likes of UberEats and DoorDash has put pressure on its business. GrubHub shares tanked 40% on Tuesday after the company released a gloomy forecast for its fourth quarter.
Excluding refranchising gains and other items, Yum earned 80 cents per share, missing the 94 cents per share expected by analysts surveyed by Refinitiv.
Net sales dropped 4% to $1.34 billion, meeting expectations.
Pizza Hut, the laggard of Yum’s three chains, reported flat same-store sales growth, falling short of Wall Street’s estimates of 1.5%. Executives said changes to its promotions helped franchisees’ profit margins but hurt its transactions.
Yum has been trying to turn around the struggling pizza chain. Last quarter, executives said that Pizza Hut could close more than 400 stores to restructure franchisees’ businesses.
“Of course, this transition will undoubtedly lead to some disruption and choppiness in the short term,” outgoing CEO Greg Creed told analysts on the conference call Wednesday.
Chief Operating Officer David Gibbs will replace the retiring chief executive on Jan. 1.
Pizza Hut’s trial with GrubHub now includes 700 stores. The delivery app lists the pizza chain on its platform and processes those orders, but Pizza Hut’s own drivers deliver the majority of GrubHub orders.
KFC also narrowly missed same-store sales expectations. In the United States, which accounts for 17% of its sales, same-store sales declined by 1%, hurt by a lack of interest in its limited-time Cheetos Sandwich. A more popular promotion was its trial of Beyond Meat‘s meatless nuggets and boneless wings at an Atlanta restaurant, which sold out in five hours.
“You can expect more to come on that front,” Gibbs said, pointing to a test of Kellogg’s Incogmeato sausage at a Pizza Hut location.
Taco Bell saw same-store sales growth of 4%, topping estimates of 3.5%. Executives said the chain had its fastest third quarter in five years when it came to service times. Drive-thru times improved by 17 seconds. Taco Bell’s competitor McDonald’s has also focused on improving drive-thru times this year.
Across all three chains, Yum opened 389 net new restaurants during the quarter. Gibbs said that looking to the future, Yum does not need an acquisition to keep growing but left the possibility open.
“We certainly wouldn’t rule out an acquisition,” he said.