Operations

Taco Bell helps Yum Brands beat analysts' Q4 estimates

Photo: iStock

February 4, 2021

The fourth quarter of 2020 worked out pretty well for Louisville, Kentucky-based Yum Brands, which beat analysts' estimates thanks to Taco Bell, which recorded a 1% sales increase to $3.67 million. Sister brands, Pizza Hut and KFC, were dragged down by their international sales declines, according to a company press release.

YUM earnings per share handily topped analysts prediction of $1.01 per share by coming in at $1.15 per share adjusted. That's a 15% gain over the previous year's quarter. Revenue also exceeded expectations of $1.72 billion, coming in at $1.74 billion. Other results included:

• Yum Brands full-year EPS for 2020 also managed a 2% increase to $3.62 though EPS for Q4, which ended Dec. 31, fell 32% to $1.08,. Full-year GAAP EPS was $2.94, down 29%, according to the company's quarterly results released this morning. The company reporter Q4 net income of $332 million, or $1.08 per share, down from $488 million, or $1.58 per share, a year
• Other fourth-quarter results include:
• Yum's three major brands' system-sales fell 2% over the previous quarter-year, led by Pizza Hut's 6% system-sales drop in Q4.
• Collectively, the Yum Brands system added 227 units.
• 2.4 million shares were repurchased at an average price per share of $103.
• Foreign currency translation favorably impacted divisional operating profit by $5 million.
• KFC Division opened 587 restaurants.
• Pizza Hut Division opened 337 restaurants and closed 540 restaurants.
• Taco Bell Division opened 93 restaurants during the quarter.

For the full year:

• Yum Brands system-wide sales globally fell 4% (excludes foreign currency translation), led by a decline of 7% at Pizza Hut, a 5% decline at KFC and flat sales at Taco Bell worldwide.
• Foreign currency translation unfavorably impacted divisional operating profit by $9 million.
• Operating margin decreased 1.5 percentage points for the quarter driven by higher general and administrative expenses, International same-store sales declines, and net new unit declines, partially offset by U.S. franchise bad debt recoveries.
• KFC Division opened 1,512 gross new restaurants in 88 countries.
• Pizza Hut Division opened 682 gross new restaurants in 58 countries and closed 1,745 restaurants.
• Pizza Hut U.S. off-premise channel generated 21% same-store sales growth when excluding closed Express units, or 18% same-store sales growth when including closed Express units.
• Taco Bell Division opened 215 gross new restaurants in 21 countries.
• Operating margin decreased 1.4 percentage points for the quarter driven by higher general and administrative expenses and negative franchise same-store sales, partially offset by higher restaurant profits in Company stores and the impact of net unit development.
• Foreign currency translation favorably impacted operating profit by $1 million for the quarter.

"Yum enters 2021 a stronger company primed to profitably grow system sales this year and beyond," CEO David Gibbs said Thursday in a news release. "Despite the challenges of 2020, our full-year results demonstrated our resilience and validated the strategies we put in place during the transformation of Yum!. We intensified our focus on leveraging our scale and reinforcing our growth model, by accelerating our investments in digital and technology to enhance the customer experience and unit economics. In 2020, digital sales hit a record of $17 billion, about a 45% increase over the prior year and a testament to our brands' ability to quickly meet new consumer needs. I am more confident than ever in the ability of our teams and franchisees to compete and win in a rapidly changing world."

Yum Brands CFO Chris Turner said the quarterly results demonstrated that the company's brands were "effectively positioned to win in an off-premise environment. He added that the business model also allowed for sustained rapid growth once the company emerges from the pandemic.

"Overall Q4 system sales declined 2%, including a 3% headwind of the 53rd week in 2019, with slightly positive net units year-over-year and a 1% same-store sales decline," Turner said in the release. "With iconic category-leading brands and a uniquely diversified global portfolio of over 50,000 restaurants, Yum! is well positioned to grow and maximize value creation for all our stakeholders for years to come."