Taco Bell owner beats on top and bottom line, falls short of key sales metric

Key Points
  • Yum Brands beats expectations on the top and bottom lines but falls short of a key sales metric.
  • CEO Greg Creed says the company was still "on track" with its full-year 2018 guidance.
A Taco Bell restaurant in Laguna Beach, California.
Scott Mlyn | CNBC

The owner of Taco Bell, KFC and Pizza Hut beat expectations on the top and bottom lines Thursday, but fell short of a key sales metric in its second-quarter earnings report.

Shares of Yum Brands were flat Thursday, but down 2.7 percent since January.

Net income rose 56 percent to $321 million, or 97 cents per share, up from $206 million, or 58 cents per share in the year-earlier period. Excluding the impact of its Grubhub investment, Yum earned 82 cents per share, beating analyst expectations of analysts surveyed by Thomson Reuters of 74 cents per share.

Revenue fell 5.5 percent to $1.37 billion, from $1.45 billion a year earlier but still better than Wall Street's forecast of $1.36 billion.

Same-store sales, a key metric in the restaurant industry, grew 1 percent in the quarter, less than the 2 percent growth that analysts had anticipated, as fewer customers dined at its Pizza Hut and Taco Bell chains.

KFC posted 2 percent same-store sales growth, higher than the 1.9 percent predicted, according to StreetAccount. The brand continued to see headwinds from the supply chain disruption of its chicken in the U.K. during the first quarter. The company said that by mid-May all restaurants were fully operational using a new supplier.

Taco Bell posted same-store sales growth of 2 percent, compared with the 2.7 percent expected; and Pizza Hut reported a 1 percent decline in same-store sales, missing an anticipated 1.2 percent growth.

"We were pleased with in-line KFC comps given challenges in China and the U.K., while Taco Bell was modestly soft and Pizza Hut showed a greater magnitude of softness," Andrew Charles, analyst at Cowen, wrote in a research note Thursday. "[The second quarter] is expected to be the softest quarter of 2018."

"We continue to execute against our multi-year transformation strategy and remain on track with our full-year 2018 guidance," CEO Greg Creed said in a statement. "Importantly, I remain confident our actions to become more focused, more franchised and more efficient are establishing the foundation required for sustainable, long-term growth that will translate to strong returns for all Yum! Brands stakeholders."