Yum Brands (NYSE: YUM), the owner of Taco Bell and KFC, beat third-quarter profit forecasts before the US open today despite a 4% fall in Taco Bell’s US same-store sales. The drop followed a cyclospora outbreak linked to shredded iceberg lettuce, and shares were higher after the results.
Shares were at $160.24 by 2.32pm UK time (9:32am in New York), up 1.7% from yesterday’s close of $157.60. That is an early, low-volume quote. Yesterday’s close was the highest of the past three months, and well above the closing low of $135.75 on the 17th of September.
Adjusted earnings per share were $1.56, against the $1.49 analysts had expected. Revenue of $2.05bn matched forecasts. Reported net income jumped to $1.62bn, or $5.92 a share, from $397m, or $1.41, a year earlier, lifted by gains from the sale of Pizza Hut.
Same-store sales, which track sales at restaurants open a year or more, fell 4% at Taco Bell US as diners pulled back after the Centers for Disease Control and Prevention announced the outbreak on the 17th of July. The worst weekend was the 18th of July.
| Metric | Actual | Consensus | Prior year |
|---|---|---|---|
| Adjusted EPS | $1.56 | $1.49 | $1.58 |
| Revenue | $2.05bn | $2.05bn | n/a |
| Taco Bell US same-store sales | -4% | n/a | n/a |
Adjusted EPS beat consensus but was below last year’s figure. Elsewhere, KFC same-store sales rose 1% and Taco Bell International rose 5%, leaving the group excluding Pizza Hut flat. KFC US system sales fell 6%.
The outbreak was already known, having been flagged with the second-quarter report, so the new information is the rebound. Chief financial officer Ranjith Roy said Taco Bell US sales were up about 1% so far in the fourth quarter and up 3% over the four weeks to Friday. Medium and light customers are back to about 95% of prior traffic.
Chief executive Chris Turner pointed to the industry comparison:
Since the end of September, Taco Bell U.S. has been outpacing the [quick-service restaurant] industry on same-store sales growth
Chris Turner, Yum Brands
The shares had already climbed to their highest close in three months before the results, and KFC US remains a drag. Whether Taco Bell’s recovery holds is the question the early gain leaves open.