Cobrand growth helping power Pizza Hut sales juggernaut

July 13, 2004

LOUISVILLE, Ky. — Pizza Hut's comparable-store sales growth of 6 percent for the four weeks ended July 10 left Yum! Brands executives crowing during a July 14 investor conference call.

Yum Chairman and CEO David Novak said that despite a difficult operating environment, the world's largest pizza chain continues to lead the worldwide pizza market in sales. A good percentage of the chain's expansion, he added, will remain tied to multibrand units.

Novak also told analysts that in select Pizza Hut multibrand sites, Pizza Hut's delivery staff will begin delivering food made by its sister brands, which include Taco Bell and KFC.

The company's cobrand experiment with its WingStreet concept has been successful enough to expand testing not only in the U.S., but in Canada.

Graham Allan, president of Yum! Restaurants International, said that while Pizza Hut is the largest branded drive-in business in the world, its international units lack "the strong delivery business as it exists in the U.S." Perfecting delivery operations overseas holds incredible growth potential for the brand, he said, as does the possible cobrand addition of its burgeoning Pasta Bravo concept.

Despite Pizza Hut's current success, like its competitors, the chain battling steep commodities costs, said Yum Chief Financial Officer Dave Deno.

"Excellent restaurant controls" have helped Pizza Hut maintain margins in the first half of 2004, he said, but he expects high meat and cheese prices will have a negative impact on third quarter profits. "This is an extremely difficult market to predict," Deno said of the cheese prices.

Read related Pizza Hut stories by clicking here.

Topics: Pizza Hut , Public Companies

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