Yum Brands misses same-store sales, profit estimates as Pizza Hut battles rivals

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By Nivedita Balu

(Reuters) – Yum Brands Inc (N:) reported quarterly same-store sales and profit that missed market expectations on Thursday, as sales at its Pizza Hut chain in the United States were hurt by stiff competition.

Pizza Hut is struggling to keep its market share in a crowded dining market, amid rivalry from Domino’s Pizza (N:), local eateries as well as food-delivery apps that offer a wide selection of restaurants to choose from.

The pizza chain, which has missed Wall Street expectations for sales growth in six out of the past eight quarters, has been a weak spot for Yum, even as its other chains, KFC and Taco Bell, continue to perform well.

“For so many years, people associated takeout and delivery solely with pizza. And now.. these online delivery companies have expanded the universe of what people take into consideration when they order out,” said Doug Ciocca, chief executive officer of Kavar Capital Partners.

“It used to be family on a Friday night, watching a movie and ordering pizza…now they stream a video and can order from a online menu,” he said. The firm holds Yum shares.

Yum’s shares were down more than 4.5% in premarket trading.

To fight competition, Pizza Hut has introduced new concepts such as heated lockers that allow diners to pick up online orders from restaurants and is testing plant-based meat toppings.

Comparable sales at the chain fell 2% in the fourth quarter, worse than analysts’ expectations for a 0.71% drop, according to IBES data from Refinitiv. Sales were down 4% in the United States, Yum said.

Overall, sales at Yum’s restaurants open at least a year climbed 2%, below the Wall Street estimate of 2.26%.

Sales grew 4% at established Taco Bell restaurants and 3% at KFC, both beating estimates.

Net income rose to $488 million, or $1.58 per share, in the fourth quarter ended Dec. 31, from $334 million, or $1.04 per share, a year earlier.

Excluding one-time items, Yum earned $1 per share, missing analysts’ estimate by 13 cents.

Total revenue rose 8.7% to $1.69 billion, above the estimate of $1.66 billion.

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