Yum shares fall as Pizza Hut and GrubHub face stiff competition
Pizza Hut is struggling to keep its market share and food delivery platform GrubHub also falls behind
Bengaluru — Yum Brands shares fell 4.7% after it reported quarterly same-store sales and profit that missed analyst expectations on Thursday, as stiff competition took a bite out of sales at its Pizza Hut chain in the US.
CEO David Gibbs said on a conference call that the outbreak of a deadly coronavirus in China would also be a headwind in 2020.
Yum lost 5c a share of its earnings in the fourth quarter because of a sharp drop in the value of its stake in food delivery platform GrubHub, which faced strong rivals.
Pizza Hut is struggling to keep its market share amid rivalry from Domino’s Pizza, as well as food-delivery apps that offer a wide selection of restaurants to choose from.
“Obviously, there’s a lot of work to be done there,” Gibbs said.
The pizza chain, which missed Wall Street expectations for sales growth in six of the past eight quarters, has been a weak spot for Yum, even as its other chains, KFC and Taco Bell, continue to outperform.
“For so many years, people associated takeout and delivery solely with pizza. And now these online delivery companies have expanded the universe of what people take into consideration when they order out,” said Doug Ciocca, CEO of Kavar Capital Partners, which holds Yum shares.
To fight competition, Pizza Hut has introduced new concepts such as heated lockers that allow restaurants to pick up online orders from restaurants and is testing plant-based meat toppings.
Comparable sales fell 2% in the fourth quarter, worse than analysts’ expectations for a 0.71% drop, according to IBES data from Refinitiv.
Overall, sales at Yum’s restaurants open at least a year climbed 2%, below the Wall Street estimate of 2.26%.
Sales grew 4% at established Taco Bell restaurants and 3% at KFC, both beating estimates.
Yum’s 2020 forecast is clouded by uncertainty from choppiness related to its largest US Pizza Hut franchisee, as well as the potential impact of the coronavirus outbreak in China and elsewhere.
However, it is not likely to be hit as hard as other companies, including Yum China, which was spun off into a separate company in 2016.
Globally, Yum Brands surpassed 50,000 restaurants in 2019. It added 2,040 new units during the year, an average of nine a day.
In the fourth quarter ended December 31, net income rose to $488m, or $1.58 a share, from $334m, or $1.04 a share, a year earlier. Excluding one-time items, Yum earned $1 a share, missing analysts’ estimate by 13c.
Total revenue rose 8.7% to $1.69bn, above the estimate of $1.66bn.