LOUISVILLE, KY. — Digital and delivery investments assisted Yum! Brands in dealing with the omicron variant of COVID-19 in the fiscal year ended Dec. 31, 2021, especially in the fourth quarter.
The Louisville-based company achieved net income of $1.58 billion in the year, equal to $5.30 per share on the common stock, which was up 74% from $904 million, or $2.99 per share, in the previous fiscal year. Total revenues increased 16% to $6.58 billion from $5.65 billion. Same-store sales growth was 10%.
Yum! Brands, the parent company of Pizza Hut, Taco Bell and KFC, has nearly doubled its digital business when compared to 2019, said David W. Gibbs, chief executive officer, in a Feb. 9 earnings call. Digital sales increased about 25% in 2021 when compared to 2020, suggesting a more permanent shift to digital channels, he said.
Yum! Brands’ stock on the New York Stock Exchange closed at $127.70 on Feb. 9, up 2.2% from a close of $124.97 on Feb. 8.
Yum! in 2021 agreed to acquire Dragontail Technologies, a food preparation optimization company that automates kitchen flow, driver dispatch and custom order tracking. The Dragontail platform now is in 2,800 stores in 21 markets across KFC and Pizza Hut.
Yum! also recently acquired two startups. Tictuc, Tel Aviv, Israel, enables consumers to order food from messaging and social media apps. Kvantum, Plano, Texas, leverages artificial intelligence to generate marketing performance insights and consumer analytics.
Focusing on digitalization helped Yum! navigate the emergence of omicron, said Hannah Cleland, consumer analyst at GlobalData. Consumers continued to order takeaways more frequently in the second half of 2021, showing they have adopted that practice as part of regular routines, she said.
“Recognizing this, Yum! Brands has streamlined its services by investing in artificial intelligence order management systems and strengthening its e-commerce website and app integration,” Cleland said. “These moves helped the company to identify and predict its customer’s behavior patterns, and safeguard against travel restrictions.”
Same-store sales increased at all three main brands at Yum! At Pizza Hut, they were up 7% in the fiscal year and 3% in the fourth quarter. Same-store sales at Taco Bell increased 11% in the fiscal year and 8% in the fourth quarter.
“Taco Bell fans continue to adopt digital ordering channels as we set digital sales records in both the US and international this year,” Gibbs said. “We will continue to bring distinctive products to life through our digital channels with early access to new products, digital-only campaigns and loyalty rewards.”
Same-store sales growth at KFC was 11% in the fiscal year and 5% in the fourth quarter.
“We also saw digital sales at KFC US grow approximately 70% year-over-year, fueled by our delivery service channel and e-commerce platform that launched nationwide in early 2021,” said Christopher Lee Turner, chief financial officer for Yum! “We continue to invest in technology platforms focused on delivering a frictionless experience for our guests, including the launch of Quick Pick-Up at KFC US in the fourth quarter that allows guests to bypass the drive-thru and grab their digital orders from cubbies inside the restaurant.”
In the fourth quarter, Yum! Brands’ net income of $330 million, or $1.13 per share on the common stock, compared with $332 million, or $1.10 per share, in the same time of the previous year. Total revenues grew 8% to $1.89 billion from $1.74 billion.
Omicron affected labor negatively in the fourth quarter.
“We did see some constriction of hours across the brands in Q4 as our franchisees dealt with the omicron impact on staffing availability,” Turner said. “The nature of that impact varied from brand to brand. For example, in Pizza Hut, you saw it really constrained delivery hours because of the challenges in staffing those driver positions.”
Omicron looks to have less of an impact this fiscal year.
“As far as omicron goes in the US specifically, it does feel like we're moving to a better place,” Gibbs said. “I was just on the phone with our chief operating officers yesterday, comparing notes across brands, and there were some really similar themes of we're past the peak impact of omicron, applications for team members are starting to come back up. So we think that the challenges and the impact on our restaurant hours may start to slowly abate over time.”