Yum Brands Opens New Locations As Revenue Rises To Pre-Pandemic Levels

Taco Bell rose to the challenge of its slogan, “Live mas,” by leading parent company Yum Brands NYSE: YUM to second-quarter results that beat Wall Street’s views and sent shares more than 6% higher Thursday.

The company said sales at Taco Bell, KFC and Pizza Hut exceeded pre-pandemic levels. Yum's fourth brand, The Habit Burger Grill, delivered 31% same-store sales growth. 

Yum closed Thursday at $130.37, up $7.58, or 6.17%. Trading volume was 32% higher than normal. 

Earnings came in at $1.16 per share, vs. expectations for $0.96 cents. Revenue was $1.6 billion vs. forecasts of $1.48.

Those topped the year-earlier results by 41% and 34% respectively. Revenue has accelerated for the past two quarters.

Wall Street expects earnings to grow 17% this year, to $4.24 per share, adding another 11% in 2022, to $4.71 per share. 

The company noted several second-quarter highlights:

• Worldwide system sales excluding foreign currency translation grew 26%, with KFC at 35%, Taco Bell at 24% and Pizza Hut at 10%.
• Yum Brands reported 2% unit growth year-over-year and record second-quarter net new-unit growth of 603.
• Foreign currency translation favorably impacted divisional operating profit by $27 million.

Addressing growth plans disrupted by the pandemic, CEO David Gibbs said in the earnings release, “On the basis of these strong results, we're reinstating our long-term growth algorithm and revising the unit growth component of this algorithm from 4% unit growth to between 4% and 5% unit growth. The resilience of our diversified global business positions us perfectly to drive growth and maximize value creation for all our stakeholders for years to come.”

As you might expect, given what seemingly every kind of business has been reporting, the company’s digital sales grew in the quarter. 

Gibbs noted that the strong momentum in the quarter was “underpinned by our investments in digital and off-premise and the agility of our brands to meet the needs of consumers in an ever-changing environment.”

The company said, “Digital system sales includes all transactions where consumers at system restaurants utilize ordering interaction that is primarily facilitated by automated technology.”

Of course, despite the jargon, you can surmise that digital sales also includes Web site and app orders. 

In the earnings call, Gibbs noted that even as economies continue to reopen, the importance of the off-premise occasion remains a top priority. “We delivered a second-quarter record with over $5 billion in digital sales, a 35% increase over the prior year. Even more exciting, for the first time, on a trailing 12-month basis, we delivered more than $20 billion in digital sales.”

He cited the Taco Bell rewards program as a driver of digital sales, along with the new KFC e-commerce Web site and app. 

When it comes to products driving growth, Gibbs cited KFC’s chicken sandwich, rolled out earlier this year as a shot across the bow to rival Chick Fil A. 

Naturally, being 2021, Gibbs addressed the effects of inflation in the form of higher commodity costs, as well as wage inflation. He noted that the company is experiencing greater inflationary pressures in the U.S. market. He added that Yum Brands’ vast purchasing scale gives it advantages vs. competitors. 

When it comes to wage inflation, he said the company has strong pricing power to offset those pressures. 

On July 23, Yum Brands cleared an area of price consolidation above $122.72. It finished last week with a gain of 5.99%, and tacked onto that this week. So far, the stock is up 6.17% for the week, and is trading in new high ground. 

The stock made a solid comeback from the sharp marketwide downturn in March 2020, holding above its 200-day moving average since October. 

Yum Brands stock is up 20.96% year-to-date and 39.46% in the past 12 months. Those gains include the 12.76% rally in the past month.