Yum Brands reported Thursday that global sales at the same store fell 15% in the fiscal second quarter, led by falling sales at the KFC brand, but the company said sales began to stabilize at its open locations.
Store closings peaked in early April, CEO David Gibbs said in a conference call with analysts to discuss earnings, adding that the company has gradually reopened stores for curbside pickup or off-site sales. the installations.
“Digital sales were a major driver of the dramatic improvement in COVID-19’s initial impact sales, reaching a record high of $ 3.5 billion for the quarter, an increase of more than $ 1 billion from a year earlier.” CEO David Gibbs said in a statement. “Same-store sales trends for open stores stabilized in June just a few points below the flat … and these trends have continued through July.”
Yum Brands shares fell 2% in premarket trading.
This is what the company reported, compared to what Wall Street expected according to an analyst survey by Refinitiv:
- Earnings per share: 82 cents, adjusted, vs. 54 cents expected
- Revenue: $ 1.2 billion, compared to $ 1.19 billion expected
Yum said net income for the quarter ended June 30 was $ 206 billion, or 67 cents a share, down from $ 289 billion, or 92 cents a share, a year earlier. The company’s minority stake in Grubhub favorably impacted earnings per share by 21 cents.
Net sales fell to $ 1.2 billion, 8.5% less compared to the previous year.
More than 95% of the company’s global stores were open in some capacity at the end of the quarter, Gibbs said. However, the company has around 24,000 dining rooms still closed in its portfolio, he said. He added that “in the United States, we really only have a fraction of our dining rooms open.”
“It really is pretty impressive that we could get global sales back to flat without those dining rooms in most of our stores,” he said.
KFC was the weakest performing division, with same-store sales 21% in the quarter. However, the fried chicken chain reported an 8% increase in sales for the entire American system. It is the only region where the chain reported an increase in sales across the system compared to last year. In China, which represents more than a quarter of the chain’s annual sales, the company reported a 6% decrease in quarterly sales, excluding the impact of the currency.
“We have certain markets where the brands are strong,” Gibbs said on the call. “And then we have other markets at the other end of the spectrum where there are still some closings and sales are still affected by Covid.”
Pizza Hut, typically the laggard in Yum’s portfolio, reported a 9% drop in global sales at the same store. In the United States, which represents 42% of Pizza Hut’s annual sales, system-wide sales increased 1%. In the chain’s second-largest market, China, the company said sales fell 12%.
Gibbs said both KFC and Pizza Hut have been shown to be resilient in dining room closings, largely due to their “great family meal solutions.” He added that pickup and curb pickup are “high-margin deals” for franchisees and that he is optimistic about the next six months for both brands.
Taco Bell quarterly sales at the same store fell 8%. The company warned earlier this month that sales at the same chain store in the United States had declined in single digits so far this quarter, although they turned positive from late April through May.
“Taco Bell was a bright spot in the quarter,” Gibbs said, adding that Taco Bell was “hit hardest” by the company’s brands due to the impact of its breakfast and early-morning offerings. “Somehow, in the United States, they were in dire straits, but they quickly partnered with franchisees … so that the business had a much stronger foundation.”
Chris Turner, chief financial officer at Yum Brands, added that some restaurants that have temporarily closed may have to close permanently. He said the company is supporting franchisees by providing deferment options and royalty grace periods.
Turner also announced that the company is ending its suspension of the share buyback program. He added that Yum does not yet offer a forecast due to the uncertainty surrounding the coronavirus pandemic.
Yum had $ 1.24 billion in cash and cash equivalents available as of June 30. Turner added that the company has begun paying for its revolver withdrawals.
Yum is trying to recover after many of its stores were closed due to government responses to the coronavirus pandemic. At one point, 11,000 Yum locations were closed due to the pandemic, representing more than a fifth of its total restaurant base.
With coronavirus cases re-emerging across large swaths of the U.S., prompting some local and state officials to reverse reopening efforts, Yum has continued to struggle to navigate the public health crisis.
– CNBC’s Amelia Lucas contributed to this report.
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