LOUISVILLE, KY. — Yum! Brands Inc. benefited from new and returning menu items at KFC, Pizza Hut and Taco Bell in the United States in the first quarter, even as the quick-service chains struggled to bring customers back in international markets.
“All of our brands had a weekly per restaurant sales record in the United States at least once during the quarter,” said David Gibbs, chief executive officer at Yum! Brands, during an April 28 conference call with analysts.
Net income for the first quarter ended March 31 was $326 million, equal to $1.07 per share on the common stock, up 75% from $83 million, or 27¢ per share, in the same period a year ago. Total revenues grew 18% to $1.49 billion from $1.26 billion.
Worldwide system sales excluding foreign currency translation grew 11%, with KFC at 11%, Taco Bell at 11% and Pizza Hut at 7%.
Gibbs attributed systemwide sales growth to strong sales in North America, the United Kingdom and Japan, which helped offset continued COVID-related business disruption in parts of Asia and Europe.
“COVID continues to impact many geographies and make our overall path to recovery uneven,” he said.
Same-store sales at KFC grew 8% year-over-year but were flat on a two-year basis, while Pizza Hut’s same-store sales climbed 12% year-over-year but declined 1% on a two-year basis. Same-store sales at Taco Bell grew 9% year-over-year and 10% on a two-year basis.
All three brands benefited from new and returning menu items, with Pizza Hut launching its Detroit-style pizza and rebooting its stuffed crust pizza. Taco Bell brought back its nacho fries and launched its first digital-only promotion, a $5 create-your-own box. KFC benefited from its new chicken sandwich offering, which yielded more than twice the volume of the brand’s previous chicken sandwich iterations in the United States.
KFC has struggled to keep up with demand for the new chicken sandwich amid a tightening domestic chicken supply, Gibbs said.
“All indications are that this is a highly incremental product,” Gibbs said. “Customers are loving the product and coming back more frequently for it.”
Habit Burger Grill, which the company acquired in the first quarter of 2019, reported same-store sales growth of 13% year-over-year and 3% on a two-year basis.
The company has benefited from shareable, family-sized menu options during the pandemic. Gibbs expects average ticket will moderate slightly but remain elevated as more consumers return to pre-COVID consumption habits.
“We are seeing ticket come down a little bit as markets reopen,” he said. “The thing that determined a lot of our success going into this was our ability to serve family meals and serve larger tickets. The brands that had those options, like KFC buckets and Pizza Hut meals for sharing, tended to do better. We're not seeing that all go away.”
The same can be said for the company’s digital business, he added.
“Even in the United States as we see dining rooms reopen, we're not seeing, for example, a decline in Taco Bell's digital business,” Gibbs said.
The company is looking to further bolster its online presence following a year of record digital sales. Digital systemwide sales in the first quarter reached more than $5 billion, up 45% from the same period a year ago.
Yum! Brands recently acquired two technology startups to accelerate off-premises growth. Tel Aviv-based Tictuk enables consumers to order food from messaging and social media apps, and Plano, Texas-based Kvantum leverages artificial intelligence to generate marketing performance insights and consumer analytics.
“They tie to two key areas of our technology strategy, one being our e-commerce and technology platform,” said Christopher Lee Turner, chief financial officer at Yum! Brands. “Another key area… is data and analytics and our ability to drive insights. Both of these, we think, are high-return acquisitions.”