Strength at Taco Bell, KFC helps Yum top 3Q forecasts

Better-than-expected results at Taco Bell and KFC helped Yum Brands top Wall Street’s forecasts in the third quarter.

But Pizza Hut remained a weak spot on the company’s balance sheet, with same-store sales growth down in the U.S., China and Europe.

Louisville, Kentucky-based Yum said profit rose 8.6 percent to $454 million, or $1.40 per share. Excluding special charges and costs, Yum Brands earned $1.04 per share, topping analyst projections by 20 cents, according to FactSet.

Revenue fell 3 percent to $1.39 billion, but still beat Wall Street forecasts.

Yum shares rose 3.5 percent to $89.34 in morning trading.

Global same-store sales, a key measure for retailers, rose 2 percent, matching expectations. The increase was driven by a 3 percent rise in sales at KFC and a 5 percent rise in sales at Taco Bell, both of which beat expectations.

Yum Brands Inc. CEO Greg Creed said product innovation, value pricing and good advertising are behind Taco Bell’s success. Over the summer, Taco Bell launched a $2 Duo burrito and drink combo and reintroduced its popular Nacho Fries.

KFC saw significant growth overseas. Same-store sales jumped 25 percent in India and 22 percent in Russia and Eastern Europe in the July-September period, the company said.

Meanwhile, Pizza Hut’s global same-store sales growth was down 1 percent for the quarter.

Pizza Hut continues to struggle with older dine-in restaurants in the U.S., where customers increasingly want carryout and delivery. Dine-in makes up just 10 percent of Pizza Hut’s U.S. sales.

The company is trying to convince franchisees to build new carryout-oriented stores in higher traffic locations, but it still has 3,000 dine-in restaurants in the U.S., Yum President and Chief Financial Officer David Gibbs said.

Creed said delivery times, digital apps and pricing are strong for Pizza Hut, but the company needs to do a better job spreading the word.

“We have to bring that sharpness of what we’re now delivering and doing to new customers,” he said.

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