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Yum! Brands Investor Day feedback

Yum! Brands, Inc. hosted its annual 2018 Investor and Analyst Day on Wednesday (5 December). The company’s restaurant brands (KFC, Pizza Hut and Taco Bell) are global leaders in the chicken, pizza and Mexican-style food categories. Yum has 45,000-restaurant operations across 140 countries. Its various properties have been gaining momentum globally in recent years, culminating in the 2016 spin-off of Yum China. Yum is also the largest restaurant company in the world, with 46,000 locations globally and seven new locations opening across their brands every single day.

Among the highlights coming out of Yum’s Investor Day were the following:

  • The firm forecast same-store sales growth of 2%-3% YoY for FY19 and full-year system sales growth in the mid-to-high single-digit range, adding that it was on track to deliver a profit of $3.75/share in FY19. Refinitiv consensus analyst forecasts were expecting same-store sales growth of 2.25% and a profit of $3.80/share – above the company’s estimate.
  • Yum management said that it isn’t “chasing numbers” as it looks at general and administrative (G&A) spending. President and CFO David Gibbs highlighted that Yum should be a leader on the technology front and while Yum currently is leading in terms of technology in several areas of the business he believes that it still has plenty of “pockets of opportunity” to use technology to drive the topline.
  • There was also a focus on Yum’s loyalty programmes across its brands, which the company believes can lead to important data that can be leveraged across its various chains. Delivery was highlighted as a way to boost same-store sales in the near future as the average ticket price rises.
  • Pizza Hut’s performance over recent quarters has been disappointing (see chart below). The firm has struggled to attract new customers and take market share from rivals as changing consumer tastes and stiff competition from other restaurant chains such as Domino’s Pizza, which has relied on its delivery business to drive growth, weighed on its performance. At the Investor Day, Yum said it would reduce Pizza Hut’s dine-in operations, instead sharpening its focus on delivery – Pizza Hut’s international dine-in assets will be cut to c. 25% in the next three to five years from the current 42% (globally and in the US).  The president of Pizza Hut’s US unit, Artie Starrs, noted that he was “extremely dissatisfied” with the chain, blaming its dine-in assets, and lack of innovation and creative advertising for its poor performance. As part of the turnaround, Pizza Hut is banking on its Delco outlets, which focus on delivery and carryout, and investments in new technologies. Gibbs said Delco is a growth driver, with 90% of its new stores built around that model. On Wednesday, Pizza Hut also announced the acquisition of an online ordering software firm, Quick Order – one of the biggest acquisitions ever for the business. Yum already has a 3% stake in GrubHub and a seat on the online food delivery company’s board.
  • Yum Brands CEO, Greg Creed told CNBC that the firm is “proud, but dissatisfied” with its progress this year, with Creed adding that Yum is boosting its technological wares to better serve its customers.

Pizza Hut same-store sales growth 2017-2018:

Source: Yum Brands




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