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Taco Bell, KFC drive Yum Brands profit

Taco Bell, KFC drive Yum Brands profit

Pizza Hut expands via Telepizza acquisition

Yum! Brands Inc. ended 2018 on a high note, with robust sales at its Taco Bell and KFC divisions and the closing of a deal that arguably returns Pizza Hut to the position of largest pizza chain in the world — a status Domino’s claimed earlier in the year. 

In December, Pizza Hut closed a deal announced in May to form an alliance with Madrid-based Telepizza Group to convert some Telepizza units to Pizza Huts and open at least 1,300 new restaurants over the next 10 years and 2,550 unit over 20 years.

Pizza Hut could use the boost. The chain, which closed out the year with 18,431 restaurants compared to 16,748 units at the end of 2017, thanks in part to the Telepizza alliance, reported flat same-store sale for the quarter as well as for the year.

KFC, by contrast, saw a 2 percent increase for the year and 3 percent for the quarter, and Taco Bell saw a 4 percent increase for the year and 6 percent increase for the quarter.

Those chains also saw accelerated unit growth over the year, with KFC opening a net 1,134 units, giving it a total of 22,621 restaurants worldwide, and Taco Bell opening a net 223 units for a total of 7,072 locations.

“Combined across our brands and led by over 2,000 world-class franchisees, we opened a record 8 gross new restaurants per day across the globe in 2018,” CEO Greg Creed said in a statement announcing the results. “As we move into 2019, we will continue to pursue even more growth, leverage our unprecedented scale, and maximize value for all Yum stakeholders.”

In a conference call with investors, he said growth at Pizza Hut, which turned 60 years old in 2018, will remain “a slow build” as the chain tries to accentuate its distinctiveness.

He added that the number of international dine-in restaurants, particularly in China, “continue to weigh on overall results,” but that the acquisition of Telepizza would help drive a shift toward more takeout and delivery-based units

Yum president, chief operating officer and chief financial officer David Gibbs said 1,282 Telepizza locations were included in the Pizza Hut unit count and told investors to expect between 100 and 150 restaurants to close in markets in Latin America and the Iberian Peninsula due to overlap. 

Creed said Pizza Hut would continue to emphasize value with the $5 lineup introduced in October, which helped improve traffic in the fourth quarter and provide “a pipeline for future product innovation.”

“Our partnership with the NFL has brought attention to these value concepts and improved the distinctiveness of our messaging,” he added.

Pizza Hut replaced Papa John’s as the official sponsor of the National Football League in 2018, and Creed said partnerships with individual players and teams would help drive distinctive marketing.

KFC’s strong sales were accentuated by southern-inspired items introduced in the fourth quarter such as hot honey chicken and chicken and waffles, introduced in November, which were “a huge hit,” Creed said.

“KFC’s bold and cheeky marketing uniquely accentuated the delicious pairing to help KFC deliver its strongest month of same-store sales growth for the year,” Creed added.

Taco Bell “doubled down on value,” during the quarter, Creed said. But the chain also benefited from the launch of holiday novelty clothing and accessories via the online Taco Bell Shop, which “generated top-tier media buzz.”

This was Taco Bell’s seventh year of same-store sale growth, which accelerated in the second half of the year. Creed praised Taco Bell’s president for North America, Julie Masino, who he said is leading a team that is “doing a great job across the board,” delivering innovation and value as well as good operating margins for franchisees.

Yum! on Thursday also announced that Taco Bell, in partnership with GrubHub, is now offering delivery at around 4,500 of the chain’s 7,000 domestic restaurants.

Gibbs said KFC would be rolling out delivery at more locations later this year.

Yum! Brands Inc.’s revenue for the year was $5.7 billion, down by 3 percent from $5.9 billion in 2018. For the quarter, revenue was $1.56 billion, down 1 percent from $1.58 billion in the fourth quarter of 2016.

Net income for the year was $1.5 billion, up 15 percent from $1.3 billion. Earnings per share was were $4.80, up by 24 percent from $3.86 in 2017.

Net income for the quarter was $334 million, down 23 percent from $436 million in the same quarter a year earlier. Earnings per share of were $1.07, down by 17 percent from $1.29 in the year-ago period.  

Contact Bret Thorn at [email protected] 

Follow him on Twitter: @foodwriterdiary

Feb. 7, 2019: This story has been updated with the correct number of Pizza Hut locations as of the end of 2018 as well the number of Telepizza units included in that number

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