Retail & Consumer

Yum Brands beats estimates as KFC, Pizza Hut sales soar

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A delivery staff member wearing a protective mask enters a KFC fast food outlet after a delivery, amid concerns about the spread of the coronavirus disease (COVID-19), in Colombo, Sri Lanka, July 9, 2020. REUTERS/Dinuka Liyanawatte

July 29 (Reuters) - Yum Brands Inc (YUM.N) beat market expectations for second-quarter results on Thursday as new menu items and steady online demand boosted sales at KFC and Pizza Hut in the United States.

Shares of the Taco Bell parent rose about 4%, hitting a record high, as comparable sales at its KFC division increased 30% in the second quarter, above estimates, helped by the easing of pandemic-induced restrictions in the United States.

Major U.S. fast-food restaurants, including Yum's chains, McDonald's (MCD.N) and Starbucks (SBUX.O), have been investing in their rewards program and launching new dishes to keep customers coming back even as full-service rivals reopen.

Yum has launched a new chicken sandwich, Detroit-style pizza and menu items made using Beyond Meat's (BYND.O) plant-based protein, while also acquiring technology firms, including Tictuk Tech, to improve its digital business.

In the second quarter ended June 30, digital sales rose 35% to over $5 billion, with Chief Executive Officer David Gibbs telling analysts all of Yum's chains "are very rapidly becoming digital brands".

"Digital is one of those things that has no downside ... The average check is higher. There's labor savings from processing orders on digital," Gibbs added on the earnings call.

Same-store sales at KFC and Pizza Hut were also above pre-pandemic levels in the United States, cushioning the blow from declines in their international segments due to renewed coronavirus curbs in certain countries.

Overall net income rose 90% from a year earlier to $391 million. Excluding items, Yum earned $1.16 per share, surpassing estimates of 96 cents.

Comparable sales rose 23%, beating estimates of a 20.5% increase, according to IBES data from Refinitiv.

Yum also said it opened a record 603 net new restaurants across its brands, including in China and India, raising its long-term store growth forecast to between 4% and 5% from 4%.

Reporting by Praveen Paramasivam in Bengaluru; Editing by Krishna Chandra Eluri

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