Yum Brands results beat as Taco Bell promotions draw customers

Yum Brands (YUM.N) topped Wall Street estimates for third-quarter results on Wednesday as a reboot of popular menu items at Taco Bell and promotional deals at KFC pulled in more budget-strapped customers looking for cheaper restaurant meals.

The company has banked on aggressive promotions and limited-time offers to drive demand, with the return of the fan-favourite Volcano Menu and $5 boxes at Taco Bell helping the chain outpace a broader slowdown in the restaurant industry.

Taco Bell’s deals aided a 2 per cent to 3 per cent increase in customer transactions at the brand in the quarter, Yum Brands CEO David Gibbs said on a post-earnings call.

“There is more pressure on the US consumer … and certainly, our industry has softened a little bit … for us, though, the US is a much more favourable situation because Taco Bell is the majority of our sales and profits (in the country),” Gibbs added.

Taco Bell also plans to improve its loyalty program in a bid to boost order frequency and spending. Starting next year, the chain would make it easier for members to earn and redeem points and offer perks such as early access to new products.

Meanwhile, Pizza Hut has been losing market share to rivals including Papa John’s (PZZA.O), Papa Murphy’s and to a lesser extent Little Caesars, with losses noticeably worsening in September, data from research firm M Science showed.

“We’ve seen a lot of competition in the pizza space … and it is driving the incremental weakness at Pizza Hut,” said Sante Faustini III, director of product intelligence at M Science.

Pizza Hut’s global same-store sales growth of 1 per cent lagged estimates of 2.08 per cent in the quarter, according to LSEG data. Global same-store sales at Taco Bell and KFC jumped a better-than-expected 8 per cent and 6 per cent, respectively.

Yum Brands’ shares rose 1 per cent in choppy trading.

The company’s overall same-store sales rose 6 per cent, beating estimates of a 4.73 per cent increase. Adjusted per-share profit of $1.44 topped estimates of $1.28.