| July 17
July 17 Yum Brands Inc's disappointing
Pizza Hut and Taco Bell results, along with other data,
suggested the U.S. fast-food business remained weak in the
second quarter and that industry leader McDonald's Corp
continues to struggle.
The U.S. fast-food segment has lagged the broader restaurant
sector, due to weak job growth and stagnant pay among the
lower-wage diners who frequent such restaurants. The sector also
is struggling to remain relevant as more consumers move away
from decadent food like cheeseburgers and french fries to
fresher, healthier fare.
"People want better food. Who loses? The fast-food guys are
stuck," Investment Technology Group restaurant analyst Steve
McDonald's, the world's biggest fast-food chain by revenue,
has posted seven straight months of declines in U.S. sales at
The chain, which reports second-quarter results on Tuesday,
recently transitioned from its "Dollar Menu" to the "Dollar and
More" menu, effectively raising prices. That increased average
checks but hurt traffic, West said.
Janney Capital Markets analyst Mark Kalinowski, who
publishes a closely watched McDonald's franchisee survey, on
Wednesday forecast a 2.6 percent drop in the chain's U.S.
same-restaurant sales for June, the final month of the second
"Customers with jobs are not choosing McDonald's," said one
of the 27 franchisees who participated in Kalinowski's survey.
"When customers have money they choose others."
Kalinowski does not expect McDonald's woes to end in July.
He forecast a 1.8 percent decline in July same-restaurant sales.
Worries are growing that overall U.S. restaurant industry
sales did not bounce back from a dismal first quarter, when an
Arctic blast of severe weather crushed results.
U.S. restaurant same-store sales rose just 0.3 percent in
the second quarter, just a slight improvement from the 0.2
percent decline in the first quarter, said Wallace Doolin, chief
executive at Black Box Intelligence, which tracks 19,000
"We were a little surprised. We thought Q2 would be stronger
than it was," said Doolin, who added that the recovery in fast
food was less robust than in the fast-casual segment dominated
by burrito chain Chipotle Mexican Grill Inc.
Yum on Wednesday reported a 2 percent drop in second-quarter
sales at established U.S. Pizza Hut restaurants, which continue
"We now expect full-year operating profit at Pizza Hut to
fall well short of our initial expectations," Yum Chief
Executive David Novak said on a conference call with analysts on
Taco Bell's same-restaurant sales grew a
weaker-than-expected 2 percent, as heavy promotion of its
national breakfast rollout distracted from lunch and dinner. Its
new Cool Ranch Spicy Doritos Locos Tacos Chicken also flopped.
Taco Bell's results improved versus the prior quarter, but
"were mixed in a challenging U.S. environment," Yum Chief
Financial Officer Patrick Grismer said on the conference call.
(Reporting by Lisa Baertlein in Los Angeles; Editing by