Yum! Brands Just Released Its Q1 Earnings. Here's What That Means for Taco Bell, Pizza Hut and KFC Franchises.
Considering a Yum! Brands franchise? Take a look at the company's first-quarter earnings.
Yum! Brands outperformed expectations for the first-quarter of 2018. According to the Zacks Consensus Estimate, the parent company of Entrepreneur Franchise 500 companies Taco Bell (No. 8), Pizza Hut (No. 47) and KFC (No. 233) was set to have total revenues of $1.08 billion. Instead, Yum! Brands revenues were $1.37 billion. That number is still down 3 percent from last year’s Q1 earnings of $1.42 billion, but it’s “consistent with our expectations,” said CEO Greg Creed in the earnings conference call Wednesday.
As a result, the company earned 90 cents per share -- again outperforming the 68 cents per share analysts in a Thomson Reuters survey expected.
KFC was the worst-performer of the three franchises, as revenues were down $658 million -- a 10 percent decrease from this time last year. KFC pointed to a shortage of chicken in the U.K. as the cause for this -- some stores were forced to temporarily close when delivery partner DHL could not fulfill deliveries.
"Adjusting for the impact of this, we estimate Yum same-store sales growth would have been 2 percent and KFC's same-store sales growth would have been 3 percent," said David Gibbs, president and chief financial officer at Yum, during the conference call.
However, in part due to positive revenues from Pizza Hut ($251 million, up 8 percent from last year) and Taco Bell ($462 million, up 2 percent from last year), Yum! Brands said net income rose to $433 million.
So, what does this mean for your investment in a Yum! Brands franchise? Well, a few things. Overall same-store sales were up just 1 percent, much less than the expected 1.9 percent. However, Taco Bell managed to outperform its expectations. Plus, a year ago, many were ready for Yum! Brands to divest Pizza Hut. Now, even if the pizza franchise’s same-store sales growth is, as Creed said on the call, “simply not acceptable,” at least the Pizza company is showing a positive net revenue. In part, that has to do with Yum! Brands’ $130 million investment back into Pizza Hut.You shouldn’t make a six-figure investment decision based on a single earnings report, but it’s good to know that Yum! Brands is trying so diligently to improve Pizza Hut’s presence and same-store sales. You can learn more about Pizza Hut and other pizza franchises here, or check out the Franchise 500 for the full list.