Yum Brands on Thursday reported that global same-store sales fell 15% in the fiscal second quarter, led by plummeting sales across the KFC brand, but the company said sales have begun to stabilize in its open locations.
Store closures peaked in early April, CEO David Gibbs said on a conference call with analysts to discuss earnings, adding that the company has gradually reopened stores for curbside pickup or off-premise sales.
“Digital sales were a big driver of the dramatic improvement in sales from the initial impact of COVID-19, reaching an all-time high of $3.5 billion for the quarter, an increase of more than $1 billion over the prior year,” CEO David Gibbs said in a statement. “Same-store sales trends for open stores stabilized in June just a few points short of flat … and these trends have continued into July.”
Yum Brands shares were down 2% in premarket trading.
Here’s what the company reported, compared with what Wall Street was expecting based on a survey of analysts by Refinitiv:
- Earnings per share: 82 cents, adjusted, vs. 54 cents expected
- Revenue: $1.2 billion, vs. $1.19 billion expected
Yum said net income for the quarter ended June 30 was $206 billion, or 67 cents per share, down from $289 billion, or 92 cents per 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, down 8.5% compared with a year earlier.
More than 95% of the company’s worldwide stores were open in some capacity by the end of the quarter, Gibbs said. However, the company has about 24,000 dining rooms still closed across its portfolio, he said. He added that “in the U.S., we really just have a fraction of our dining rooms open.”
“It’s really quite impressive that we were able to get sales now globally back to approaching flat without those dining rooms in the majority of our stores,” he said.
KFC was the weakest performing division, with same-store sales down 21% in the quarter. However, the fried chicken chain reported an 8% increase in U.S. systemwide sales. It’s the only region where the chain reported a systemwide sales increase compared with last year. In China, which accounts for more than a quarter of the chain’s annual sales, the company reported a 6% decrease in quarterly sales, excluding the impact of currency.
“We’ve got certain markets where brands are strong,” Gibbs said on the call. “And then we’ve got other markets at the other end of the spectrum where there are still some closures and sales are still impacted by Covid.”
Pizza Hut, typically the laggard of Yum’s portfolio, reported a 9% drop in global same-store sales. Weakness in international markets was offset by gains in the U.S., where same-store sales rose 5%.
Looking at Pizza Hut’s systemwide sales, which exclude currency, sales rose 1% in the U.S., which accounts for 42% of the chain’s annual sales. In the chain’s second biggest market, China, the company said systemwide sales fell 12%.
Gibbs said that both KFC and Pizza Hut have proven resilient amid dining room closures, largely because of their “great family meal solutions.” He added that carryout and curbside pickup are “high-margin business” for franchisees and that he’s optimistic about the next six months for both brands.
Taco Bell’s quarterly same-store sales dropped 8%. The company warned earlier this month that the chain’s U.S. same-store sales had declined by high-single digits so far in the quarter, although they turned positive from the end of April through May.
“Taco Bell was a bright spot on the quarter,” Gibbs said, adding that Taco Bell was “impacted the most” of the company’s brands because of the hit to their late-night and breakfast offerings. “They were the ones in some ways in the U.S. who were in dire straits, but quickly partnered with franchisees … to get the business on much more solid footing.”
Chris Turner, chief financial officer of Yum Brands, added that some restaurants that have temporarily closed might have to permanently closed. He said the company is supporting franchisees by providing payment deferral options and royalty grace periods.
Turner also announced that the company is ending its suspension of the share repurchase program. He added that Yum is still not offering a forecast due to uncertainty around the coronavirus pandemic.
Yum had $1.24 billion in cash and cash equivalents on hand as of June 30. Turner added that the company has begun to repay on its revolver withdrawals.
Yum is trying to recover after many of its stores were shuttered 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 surging again across large swaths of the U.S., prompting some local and state officials to roll back reopening efforts, Yum has continued to struggle to navigate the public health crisis.
— CNBC’s Amelia Lucas contributed to this report.