Yum Brands Inc. beat Wall Street estimates for third-quarter revenue and profit on Oct. 31, as strong sales at KFC and Taco Bell more than made up for further weakness at Pizza Hut, sending its shares up as much as 5 percent.
Competition between big U.S. fast-food chains has intensified as Yum, McDonald’s Corp. and Domino’s Pizza Inc. try to lure cash-conscious customers with dollar menus, discounts, and new breakfast items.
To grab market share, Yum launched several value meal offers this year that included Taco Bell’s $1 nacho fries and a $1 Triple Melt burritos, as well as KFC’s “$20, Fill Up” meal.
The efforts helped the company register better-than-expected growth in same-store sales at both the chains.
“Taco Bell is just doing everything really well,” Chief Executive Officer Greg Creed said. “The value price points are spot on.”
Same-restaurant sale at Taco Bell rose 5 percent. KFC, best known for its crispy fried chicken, reported a 3 percent rise.
Pizza Hut, however, remained a dark spot, with same-restaurant sales falling 1 percent, due to declines in the United States, where it faces slowing demand.
The chain has been trying to turn itself around in its home market, ramping up promotional offerings such as the large two-topping pizza for $5.99.
But that has so far done little for the chain, which continues to lose customers to Domino’s, meal-kit companies and grocery stores that sell prepared food.
“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,” Neil Saunders, managing director of GlobalData Retail said.
Pizza Hut’s weak performance also undermined expectations that it would benefit most from struggles at Papa John’s International Inc. in the wake of an acrimonious split with its founder.
Company executives also called out Pizza Hut’s underperformance on a post-earnings call, with Creed saying the promotions were not distinctive enough to attract new customers.
Overall, revenue fell 3 percent to $1.39 billion, but beat analysts’ average estimate.
Excluding one-time items, Yum earned $1.04 per share, beating analysts’ average expectation of 83 cents, according to Refinitiv estimates.
Yum’s net income rose 8.6 percent to $454 million in the three months ended Sept. 30.
The company’s shares were up nearly 4.5 percent at $90.35, adding to its gains of 6 percent this year.
By Aishwarya Venugopal