Categories: Earnings

Yum! Brands Adapts To COVID-19 With Contactless Delivery And Digital Technology

Amid a focus on off-premise dining and digital technology, Yum! Brands CEO David Gibbs said the firm saw early signs of recovery in markets first impacted by the coronavirus and stabilization in other places. About 7,000 of its global stores were closed as of its 8-K filing, and that figure rose to about 11,000. But the firm has seen roughly 1,000 reopens from the trough.

KFC reported a first-quarter system sales decrease of 2 percent as an 8 percent same-store sales drop was offset, in part, by 6 percent in net new unit growth. Gibbs noted that as part of the company’s COVID-19 pivot, contactless services are available in 90 percent of KFC markets, and the company is “doubling down on digital and expanding delivery globally.”

At Pizza Hut, system sales fell 9 percent with a same-store sales drop of 11 percent and flat net new unit growth. Its same-store sales were down 5 percent in Q1 with the exclusion of China. “Globally, Pizza Hut had seen a mass shift in brand messaging focusing on contactless services, food safety, team member safety and giving back to the community,” Gibbs said.

The firm was able to quickly create protocols and training materials to support a launch of contactless delivery, carry out, and curbside pickup available in 90-plus nations. It also moved toward more targeted, higher-margin quick service restaurant (QSR) value constructs at Pizza Hut U.S. in Q1 and leaned into core offerings while providing limited-time promotional value on premium products.

And Taco Bell Q1 system sales increased 4 percent with 1 percent same-store sales growth and 4 percent net new unit growth. As was the case with all of its brands, Gibbs said, “Taco Bell responded quickly across all fronts to adapt to COVID-19.” He noted the brand’s advertising is showcasing off-premise options and free delivery on orders of $12 or more via Grubhub.

In the United States, Gibbs noted that delivery and drive-thru sales pre-COVID-19 comprised about three-quarters of sales. He pointed out that it is now almost all of Taco Bell sales, with digital comprising roughly 10 percent. Also, the company finished the acquisition of The Habit Burger Grill in the first quarter.

All told, Yum! Brands reported revenues of $1.26 billion and diluted earnings per share excluding special items of 64 cents, while analysts had forecast revenues of $1.2 billion and earnings per share of 65 cents. Shares in the company were down about .75 percent as of approximately 1 p.m. on Wednesday (April 29).

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