Yum Brands, the parent company of Taco Bell, KFC, and The Habit Burger & Grill, reported higher-than-expected third-quarter earnings on Tuesday, driven in part by KFC’s global expansion and higher revenue from its franchises.
However, an outbreak of cyclosporiasis linked to tainted shredded lettuce at Taco Bell, which Yum considers its “growth engine,” affected the chain’s same-store sales, which dropped 4% in the U.S. for the quarter.
Despite that, it appears consumers have not lost their appetite for Taco Bell. On Tuesday’s earnings call, Yum CFO Ranjith Roy said that looking ahead to the fourth quarter, same-store sales are up about 1%—and up 3% over the last four weeks—compared with the same period last year. Yum attributed the fast bounce back to a “magic formula” that included Tuesday weekly deals for loyalty members and limited-time offers.
“Since the end of September, Taco Bell U.S. has been outpacing the [quick-service restaurant] industry on same-store sales growth,” Yum Brands CEO Chris Turner said in an earnings statement. “Taco Bell will continue building on this momentum, with differentiated value and innovation that resonate across all consumer groups. . . . [We] remain confident in our ability to deliver consistent earnings growth and create long-term shareholder value.”
Shares of Yum Brands Inc. (NYSE: YUM) were down 0.2% in Wednesday afternoon trading.
For the quarter ending September 30, Yum Brands’ reported revenue increased 3.8%, coming in at $2.05 billion, with earnings per share (EPS) of $1.56 adjusted, exceeding the Zacks Consensus Estimate of $1.47. Net income rose to $1.62 billion, up from $397 million at the same time last year.
The company said the gains excluded the company’s recently completed divestment from Pizza Hut, which was acquired by LongRange Capital and Yum China Holdings Inc.
