Expect many new products from Pizza Hut in '04

Feb. 15, 2004

LOUISVILLE, Ky.—David Novak, chairman of Pizza Hut parent Yum! Brands, said strong and steady progress throughout 2003 at the world's largest pizza chain has positioned it for even more growth in 2004.

Speaking during a Feb. 12 investor conference call, Novak said Pizza Hut posted same-store sales growth in seven of the final eight periods of last year, and that a strong showing in its first period (January) '04 shows the brand is in fine shape.

"The brand was repositioned to target the heart of the pizza category, the family and the primary decision maker, Mom," Novak said. "The new product pipeline has been rebuilt with a record number of products and concept tests." He called the new 4forALL, the most significant pizza category innovation since Pizza Hut's release of its Stuffed Crust pie more than a decade ago.

Pizza Hut also steadily improved its operations in '03, and became the first of the five Yum brands to drop employee turnover below 100 percent for the full year.

"Low team member turnover is an operational fundamental that is critical to achieving consistent same-store sales results," Novak said.

In hopes of revitalizing its dine-in business, Pizza Hut will continue testing Pasta Bravo, and further develop its 59-unit WingStreet concept (boneless and bone-in wings) as a cobrand option for Pizza Hut's delivery-carryout units

"Initial results are promising," Novak said. "We are as bullish as ever on the prospect of multibranding."

Yum Chief Financial Officer Dave Deno said positive growth in the entire pizza category in the last half of 2003 has given Pizza Hut strong momentum in the new year, but product innovation, he added, will be key to new growth.

Novak echoed Deno, saying the company likes to "win on innovation," which "breaks through the potential commoditization of this category." Hinting that other pizza companies may have tried to copy its new 4forALL pizza, Novak warned that doing so will be a daunting task.

"It's not easy for our competition to duplicate the 4forALL because of the dough system we have," said Novak, adding that the new multi-choice pie has been well received. "We've launched this product with lower complaints than any new product we've ever launched. Of a thousand complaints we get (for all of Pizza Hut), only one is on the 4forALL."

For its fourth quarter overall, Yum performed well, posting a fourth-quarter profit of 65 cents a share, which exceed a Wall Street-forecasted range of 62 cents to 63 cents a share. Reported earnings were 70 cents a share for the quarter on sales increases of 8 percent to $2.65 billion.

To read related Pizza Hut stories, click here.

Topics: Pizza Hut , Public Companies

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