News

Pizza Hut US drags down Yum Brands Q1

May 3, 2017

Yum Brands said today that despite a drag on growth and sales from its U.S. Pizza Hut arm, the Louisville-based restaurant company is performing very well, thanks to Taco Bell's same-store sales growth and operating profit success at KFC, according to a news release. 

The company's Q1 2017 GAAP operating profit grew 39 percent, while Q1 core operating profit grew 9 percent. Likewise, a news release said Q1 GAAP EPS was up 43 percent to 77 cents, and EPS excluding Special Items was up 17 percent to 65 cents. 

"Our strategic transformation of Yum! Brands is already well underway, helping us deliver a solid start to 2017 with core operating profit growth of 9 percent in the first quarter," Yum Brands CEO Greg Creed said in a news release. "This growth was led by Taco Bell’s impressive same-store sales growth of 8 percent and double-digit core operating profit growth at KFC, partially offset by weakness at Pizza Hut U.S. We remain confident that our multi-year strategy to be more focused, more franchised and more efficient will further strengthen our brands, accelerate growth, increase consistency in our results and increase capital returns."

System-wide, Yum Brands said its sales grew 5 percent and it experienced a 2 percent same-store sales growth increase, and a 3 percent increase in net units. 

Breakdown of brand performance

• KFC delivered double-digit core operating profit growth of 13 percent, driven by same-store sales growth, franchise net-unit development and decreased G&A. Foreign currency translation negatively impacted GAAP operating profit for KFC by $5 million.
• KFC system sales grew 5 percent, excluding foreign currency translation, while the division opened 176 new international restaurants in 36 countries, including 150 units in emerging markets.
• Operating margin increased 3.2 percentage points driven by same-store sales growth, refranchising, decreased G&A and franchise net-unit development. These positives were partially offset by commodity and labor inflation and foreign currency translation negatively impacted GAAP operating profit by $3 million.
• Pizza Hut reported even system sales, excluding foreign currency translation. The division opened 152 new international restaurants in 36 countries, including 83 units in emerging markets.
• Operating margin increased 3.2 percentage points driven by refranchising partially offset by a decrease in same-store sales.
• Foreign currency translation negatively impacted GAAP operating profit by $2 million.
• Taco Bell same-store sales grew 8 percent driven by value and innovation, leading to a core operating profit of 19 percent for the Mexican food brand.
• Taco Bell system sales increased 12 percent and the brand opened 54 new restaurants.
• Restaurant margin grew 0.8 percentage points to 21.8 percent, driven by same-store sales growth partially offset by increased cost of sales associated with value promotions and labor inflation.
• Operating margin increased 3.4 percentage points driven by same-store sales growth.