Yum Sales Climb as Taco Bell Leads Charge, Pizza Hut Inches Back

(Bloomberg) -- Yum! Brands Inc.’s latest quarterly sales climbed more than expected, propelled by strength at Taco Bell and KFC, its strongest divisions. Even laggard Pizza Hut showed some new signs of life.

• Comparable sales at Yum rose 5% last quarter, up from 1% in the year-ago period. That topped the 3.1% average estimate from Consensus Metrix. Taco Bell stood out in the mix with a 7% gain, nearly double the 3.8% projection.

Key Insights

• The report marks good news for the restaurant industry after both Starbucks Corp. and McDonald’s Corp. recently reported their fastest growth in years. Yum’s results show the biggest players are overcoming higher labor and food costs to lure in more diners.
• Taco Bell is luring customers with discounts and delivery through GrubHub Inc., which Yum bought a stake in last year. But Taco Bell’s not alone: rival Chipotle Mexican Grill Inc. and others are also pushing hard on convenience and speedy deliveries.
• While Pizza Hut sales are improving, the pace is slow. Sales there rose 2% in the quarter, the best level in several years. The recent success of delivery pioneer Domino’s Pizza Inc. may be complicating the chain’s recovery.
• Restaurants across the globe are facing pressure from rising costs, with labor and protein inflation at the forefront. McDonald’s and others have responded by raising menu prices. Yum didn’t specifically mention those costs in its earnings release, so investors will be listening for more details on the call today.

Market Reaction

• The shares rose as much as 3.7% to $116.65 in New York, the biggest intraday gain since December. The stock has advanced 26% this year, outpacing the S&P 500.
• Get more on results here.

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net

To contact the editors responsible for this story: Crayton Harrison at tharrison5@bloomberg.net, Jonathan Roeder, Anne Riley Moffat

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