Overall earnings were strong but same-store sales fell short.
After Yum Brands delivered its first-quarter earnings report on Thursday, it was met with mixed reactions from investors. The company’s shares rose one percent in premarket trading before dropping two percent.
Overall earnings exceeded investor expectations but same-store growth at Pizza Hut and Taco Bell was sluggish. Earnings came to 82 cents per share, instead of the expected 81 cents per share.
Total revenue was $1.25 billion, as expected. And same-store sales were up by four percent instead of the expected 2.66 percent.
Taking a closer look
Yum Brands operates the fast food chains Pizza Hut, KFC, and Taco Bell. Yum attributed its growth to same-store sales and its re-franchising efforts. Yum has been selling off a number of stores to franchisees as a way to cut costs.
The company raised its profit margins for all three brands, bringing in more money in profit. Here’s how each store performed in the first quarter of 2019.
Stores that have been open for a year or more saw its sales fall mostly flat this quarter. Investors were expecting an increase of at least half a percentage point. And in the U.S., which is Pizza Hut’s largest market, sales actually declined by one percent.
Taco Bell saw its same-store sales increase by four percent, missing investor expectations of 4.47 percent. Yum CEO Greg Creed told investors that this was largely due to the company’s slow international growth. Taco Bell opened 12 new international stores in the first quarter and growth was slower than it was in its U.S. market.
KFC accounts for the bulk of Yum’s revenue so it was able to make up for any ground lost by Pizza Hut and Taco Bell. Same-store sales increased by five percent, which beat investor expectations.
Last year, the company saw its sales lag in the U.K. due to a chicken shortage so it was able to make up for lost ground at the start of 2019. And sales in China rose by 11 percent.
The company’s first-quarter earnings may not have been all that investors hoped but there are many things working in Yum’s favor. The company was able to open 310 new stores during the first quarter.
Not to mention the company invested $200 million in the online food ordering company Grubhub. This investment set Yum Brands back for the short term but should prove to be profitable down the road.