Yum misses estimates on key sales measure as Pizza Hut, KFC fizzle

(Reuters) – Yum Brands Inc’s (YUM.N) sales at established outlets rose at just half the pace expected by Wall Street, as its KFC and Pizza Hut chains struggled to attract enough diners in a fiercely competitive restaurant industry.

A Kentucky Fried Chicken (KFC) logo is pictured on a sign in North Miami Beach, Florida, U.S. April 6, 2017. REUTERS/Carlo Allegri

Competition between restaurants has intensified as Yum, McDonald’s Corp (MCD.N) and Domino’s Pizza Inc (DPZ.N) pull out all the stops to lure diners with dollar menus, discounts and new breakfast items as consumers increasingly spend less on processed food and eating out.

Yum shares fell 5 percent in premarket trading on Wednesday after results showed sales at restaurants open at least a year rose 1 percent in the three months ended March 31, compared with the 2 percent expected by analysts, according to Thomson Reuters I/B/E/S.

The results also contrasted stronger-than-expected quarterly sales from McDonald’s and Domino’s over the past week, indicating that Louisville, Kentucky-based Yum may have lost market share to rivals.

Same-restaurant sales at KFC rose 2 percent in the first quarter of 2018, the slowest growth rate in four quarters. The fried chicken outlet’s U.S. same-restaurant sales were unchanged.

On a conference call with analysts, Yum executives said KFC would have recorded a 3 percent growth in same-restaurant sales had it not been for supply chain issues in the United Kingdom.

Yum was forced to shut hundreds of British KFC outlets in February due to a shortage of chicken resulting from the abrupt change of a supplier.

Pizza Hut also missed expectations for same-restaurant sales, which rose a lower-than-expected 1 percent worldwide, reflecting a 2 percent decline in overseas markets.

Overall revenue at Yum fell 3 percent to $1.37 billion but topped estimates of $1.09 billion, thanks to stronger sales at Taco Bell.

Net income jumped to $433 million from $280 million last year, reflecting gains from the sale of company-owned restaurants to franchisees.

Excluding one-time items, Yum earned 90 cents per share, ahead of expectations of 68 cents.

Reporting by Aishwarya Venugopal in Bengaluru; Editing by Sai Sachin Ravikumar

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