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Taco Bell parent Yum Brands earnings miss expectations, dragged by Pizza Hut

Heidi Chung

Yum Brands (YUM) reported a mixed fourth quarter Thursday morning, as softer-than-expected sales at Pizza Hut weighed on the fast food chain. Shares of Yum fell 1.67% in pre-market trading as of 7:30 a.m. ET.

Here were the main numbers for Yum Brands’ fourth quarter, compare to Bloomberg estimates:

  • Revenue: $1.69 billion vs. $1.65 billion expected

  • Adj. earnings per share: $1.00 vs. $1.13 expected

  • Worldwide same-store sales: +2.0% vs. +2.1% expected

  • KFC same-store sales: +3% vs. +2.9% expected

  • Taco Bell same-store sales: +4% vs. +3.1% expected

  • Pizza Hut same-store sales: -2% vs. 0% expected

“I am proud to announce that we completed our three-year transformation of Yum!, having achieved all of our transformation goals and evolved into a more focused, more franchised and more efficient business. 2019 was a truly historic year for our company,” CEO David Gibbs said in a statement.

“For the full-year, we generated over $50 billion in system sales and ended the year with over 50,000 restaurants thanks to our world-class franchisees,” he added.

Taco Bell International Menu Tasting at Taco Bell Headquarters on December 9, 2019 in Irvine, California. (Photo by Rachel Murray/Getty Images for Taco Bell)

Gibbs took over as CEO in January after longtime CEO Greg Creed retired.

Competition in the fast food industry has been stiff, and companies like Yum have been looking to diversify offerings, advance their digital impact and expand delivery.

As a result, Yum Brands announced in early January that it would jumping into the burger market with its $375 million acquisition of California-based Habit Burger. The transaction is expected to be completed by the end of the second quarter of 2020, and the company sees a minimal impact to adjusted earnings per share during the year.

“We are excited about the growth aspects of the deal,” Gibbs told Yahoo Finance in an interview.

“The thing for me is that it’s a fast casual concept with a broad menu. More than 40% of the sales come from outside of burgers,” he said. “It has a nice business in grilled chicken sandwiches, sushi grade tuna sandwiches and veggie burgers and salads. It’s all really on trend with consumers.”

The deadly coronavirus has been weighing on multinational companies with exposure to China and the surrounding region. As of the fourth quarter, China is the largest market for KFC and represents 27% of sales. Meanwhile, China is Pizza Hut’s second-largest market behind the U.S. and accounts for 17% of sales.

Yum China CEO Joey Wat said Wednesday evening “looking ahead, while it is difficult to fully ascertain the expected impact of the coronavirus outbreak at this time, we can reasonably expect it to materially affect our 2020 sales and profits.”

Since the outbreak, Yum China closed stores Jan 24. in the Hubei Province, and now more than 30% of its stores are temporarily closed. “For restaurants that remain open, same-store sales since the Chinese New Year holiday period were down 40-50% compared to the comparable Chinese New Year holiday period in 2019, due to shortened operating hours, reduced traffic and other factors related to the outbreak.”

There is currently no estimate for when stores can reopen and when the traffic will be restored, according to the company.

Yum China was spun off from Yum Brands in 2016 and is listed on the New York Stock Exchange.

Yum’s earnings conference call with management kicks off at 8:15 a.m. ET.

Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.

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