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Yum! tops Wall Street estimates in Q2 as KFC, Taco Bell sales boom

·Reporter, Booking Producer
·4-min read
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Yum! Brands (YUM) on Thursday reported second-quarter earnings that beat Wall Street estimates, as a major boom in same-store and digital sales at brands like KFC and Taco Bell solidified COVID-19 era eating trends.

Here’s what the Kentucky-based company reported compared to Wall Street’s expectations, according to Bloomberg consensus estimate,

  • Revenue: $1.60 billion versus 1.48 billion expected

  • Adj. earnings per share (EPS): $1.16 versus $0.96 per share expected

  • Same-store sales: 23% versus 17.54% expected

The company outperformed expectations, with digital sales alone reaping over $5 billion during the quarter. The outperformance came in the face of obstacles including supply chain shortages, and the impact of the labor shortage for the industry at-large. 

The stock traded up by over 2% in pre-market action, threatening a new 52-week high when the regular session begins.

Yum! Brands CEO David Gibbs stated that the quarterly performance showed the "sustained momentum" of investments in both digital and off-premise dining, and the work done by local franchisees.

In a release, Gibbs added that "on the basis of these strong results, we're reinstating our long-term growth algorithm and revising the unit growth component of this algorithm from 4% unit growth to between 4% and 5% unit growth," hinting at a return to pre-pandemic growth.

This quarter alone, the company reported 2 percent unit growth year over year, and opened a record 603 net new units. Same-stores at each brand contributed heavily to the successful quarter, KFC, up 30 percent, Taco Bell, up 21 percent and Pizza Hut, up 10 percent compared to a year ago.

For food chains, the COVID-19 era macro trend of digital deals and value menus have been a huge help, with indoor dining severely curtailed by the pandemic. On Tuesday, shares of Yum! Brands hit a 52-week high of $125.63.

Digital boom offsets drop in foot traffic

NEW YORK, NEW YORK - NOVEMBER 10: An exterior view of a Pizza Hut restaurant in the Canarsie neighborhood of Brooklyn on November 10, 2020 in New York City. On Tuesday, Pizza Hut in partnership with Beyond Meat became the first pizza franchise to offer a plant-based meat pizza across the United States. (Photo by Michael M. Santiago/Getty Images)
NEW YORK, NEW YORK - NOVEMBER 10: An exterior view of a Pizza Hut restaurant in the Canarsie neighborhood of Brooklyn on November 10, 2020 in New York City. On Tuesday, Pizza Hut in partnership with Beyond Meat became the first pizza franchise to offer a plant-based meat pizza across the United States. (Photo by Michael M. Santiago/Getty Images)

Pandemic era eating has been mostly defined by restaurants using mobile apps and delivery to offer incentives — such as convenience, loyalty points and value deals — to offset restrictions that kept most dining rooms shuttered. Yum's results underscore how the fast food giant has adapted to the new reality.

According to data intelligence platform Placer.ai, visit gaps have shrunk as customers begin to return to indoor dining. Compared to 2019, visits during the week of July 12th, 2021 were down 9.8 percent at Taco Bell, down 14.1 percent at KFC and down 24.6 percent at Pizza Hut. Compared to the week prior July 5th, 2021, visits were slightly up across the board. 

Tuna N. Amobi of CFRA projected revenue growth of nearly 12 percent in 2021 in a recent note, after the company saw one percent dip in 2020. He also expects a higher ticket price among customers and "improvement" in customer traffic to play a role. 

Amobi expects the company to sustain recent gains in digital-based sales, which comprise more than 40 percent of total sales. The recent acquisition of AI tech company Dragontail systems, which helps manage both preparation and food delivery, should aid in this effort, the analyst said.

CFRA has a 12-month price target of $130 on the stock. Meanwhile, Placer.ai added that Yum! brands "could be positioned for an exceptional recovery period" — largely due to the ability to effectively meet customers where they are. 

Supply chain challenges are in focus for Wall Street too. Last week, Taco Bell was transparent with customers regarding major menu shortages that left customers clamoring for out-of-stock favorites. 

At the same time, KFC had a hard time keeping up with heightened demand for its entree into the chicken sandwich war, at a time when the entire fast food industry continues to struggle with a poultry shortage.

Brooke DiPalma is a reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com. Check out her latest:

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