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Taco Bell parent Yum Brands misses earnings estimates as higher costs weigh on profits

Customers wearing Taco Bell foam taco hats exit the company’s restaurant, a unit of Yum! Brands Inc. in Bangkok, Thailand.

Brent Lewin | Bloomberg | Getty Images

Yum Brands on Wednesday reported mixed results for its fourth quarter as higher costs weighed on profits, leading to an earnings miss.

Shares of the company rose more than 4% in early trading.

Here’s what Yum reported for the quarter ended Dec. 31 compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

  • Earnings per share: $1.02 adjusted vs. $1.09 expected
  • Revenue: $1.89 billion vs. $1.88 billion expected

Yum reported fourth-quarter net income of $330 million, or $1.11 per share, down from $332 million, or $1.08 per share, a year earlier.

Excluding items, the company earned $1.02 per share, falling short of the $1.09 per share expected by analysts surveyed by Refinitiv.

Taco Bell, KFC and Pizza Hut all saw company restaurant margins shrink during the quarter. Across the restaurant industry, operators have been dealing with higher food, freight and labor costs.

Net sales rose 8% to $1.89 billion, topping expectations of $1.88 billion. Yum reported same-store sales growth of 5% compared with the year-ago period and 4% on a two-year basis.

Taco Bell reported the highest jump in same-store sales growth of Yum’s portfolio. The Mexican-inspired chain saw its same-store sales climb 8% after several weaker quarters, hurt by a lack of late-night and morning customers. Taco Bell introduced a new line of breakfast burritos in the quarter as part of a bid to rejuvenate morning sales. Nearly 20% of Taco Bell transactions in the U.S. are digital orders, executives said on an earnings call.

KFC’s same-store sales rose 5% in the quarter. In the U.S., its second-largest market, same-store sales jumped 4%. Demand for its revamped chicken sandwich has stayed strong, accounting for 9% of the chain’s product mix now, up from 1% before the reformulation. KFC’s domestic market accounts for less than a fifth of its systemwide sales. Shrinking systemwide sales in China, its largest market, weighed on the chain’s overall same-store sales growth.

Pizza Hut reported same-store sales growth of 3%. The chain’s U.S. same-store sales ticked up just 1% in the quarter as the market faced tough comparisons with last year’s same-store sales growth. In the U.S., Pizza Hut has been trying to mount a comeback, an effort that was initially helped by soaring demand for its pizza during lockdowns. Executives said the Covid omicron variant put pressure on pizza delivery because of a shortage of drivers.

“I think the good news is we believe, as [CEO David Gibbs] said, that we’re past the peak probably two or three weeks ago, and we were talking to our CEOs [Tuesday] that things have gotten significantly better in the last couple of weeks,” said Yum CFO Chris Turner.

In 2022, Yum expects to return to its long-term goal of same-store sales growth in a range of 2% to 3% and unit growth of 4% to 5%.

Read the full earnings report here.

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