Yum Brands’2020 Results To Be Hit Due To Coronavirus And Weak Performance Of Pizza Hut

The coronavirus outbreak in China impacted sale of Yum Brands in the country while the planned turnaround of Pizza Hut in the United States did not do well which forced Yum Brands to issue a warning that results of the company for the current year could be lower than what it had predicted for the long-term.

The warning resulted in a 4 per cent drop in the shares of the company in early trading on Thursday.

“While Yum’s business model is highly diversified such that the impact on our financial performance will not be as significant as what many companies will experience, this will certainly be a headwind for 2020,” CEO David Gibbs told analysts.

In its long term forecast, the company had estimated that there would be a growth of between 2 per cent and 3 per cent in the annual same-store sales and a 4 per cent growth in net new restaurant.

According to a survey of analysts by Refinitiv, analysts were expecting earnings per share of $1.13 while the company clocked a lower.  The company reported revenue of $1.69 billion compared to market expectations of $1.66 billion. The company also reported a 2 per cent growth in same-store sales compared to market expectations of 2.3 per cent.

A net income of $488 million, or $1.58 per share for the fiscal fourth quarter was reported by Taco Bell’s parent company while it had reported net income of $334 million, or $1.04 per share in the same quarter a years ago.

The company’s minority stake in Grubhub trimmed earnings per share by 5 cents. Fierce competition with DoorDash, Uber Eats and Postmates put pressure on the business of Grubhub making the company struggle in 2019.

The company also missed earnings of $1.13 per share as expected by analysts surveyed by Refinitiv as the company reported earnings of $1 per share excluding refranchising gains and other items.

There was a 9 per cent growth in net sales at $1.69 billion which surpassed market expectations of $1.66 billion. A 2 per cent growth in same-store sales was reported by the company across its multiple brands of KFC, Pizza Hut and Taco Bell.

The announcement of adding Habit Restaurants as its fourth portfolio was made by the company in January. Habit Restaurants is the owners of the Habit Burger Grill. It is expected that the acquisition would be completed in the second quarter.

During the quarter, Pizza Hut was the worst performer of the group. There was a 2 per cent drop in the same-store sales at the pizza chain during the quarter which was a much lower than the anticipations of the markets. At 4 per cent, the drop in sale store sale in the United States was even lower than the market expectations. The new interim president of Pizza Hut’s US division now will be Kevin Hochman, who led KFC’s turnaround in its home market as its US president, Gibbs said on Thursday.

(Adapted from CNBC.com)

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