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What Drove Yum! Brands’ Same-Store Sales Growth in 2Q16?

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Jul. 18 2016, Updated 9:07 a.m. ET

Same-store sales growth

Same-store sales growth (or SSSG) is expressed as a percentage. It’s a measure of the increase in revenue from a company’s existing restaurants over a certain period. Let’s take a look at Yum! Brands’ (YUM) same-store sales growth year-over-year.

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China division

SSSG for YUM’s China division was flat during 2Q16. The contribution from price increases and product mixes were mitigated by the decline in traffic. KFC’s SSSG of 3% was offset by Pizza Hut’s SSSG of -11%.

Simplification of menus, improved efficiency, and better conveying of value proposition to customers drove KFC’s SSSG. It was propelled by strong sales in the second half of the quarter from its bucket-related promotions, which resonated with customers. With the launch of box meals in June and promotions related to the wings bucket, KFC has posted SSSG of lower double digits in the quarter to-date.

Global brand divisions

In 2Q16, YUM’s KFC and Taco Bell divisions posted SSSG of 2% and -1%, respectively. Pizza Hut’s SSSG was flat. The enhancement of customer experience through reimaging drove KFC’s SSSG.

Pizza Hut’s SSSG was hurt by aggressive promotions from competitors. The $5 flavor menu and $6.99 any medium pairs deal along with technological advancement drove Pizza Hut’s US SSSG by 1%. However, the division posted -1% SSSG in its international business.

Strong sales in Thailand, Canada, and the United Kingdom were offset by a weakness in Korea. To overcome the decline in SSSG, YUM is rolling out proven US successful tactics to international markets.

Taco Bell, which accounted for 6% of SSSG in 2Q15, posted a decline of 1% in 2Q16. The introduction of the $5 cravings bundle and the deal bundle improved Taco Bell’s SSSG toward the latter part of 2Q16. During the first five weeks of 3Q16, SSSG for Taco Bell was positive.

Peer comparisons

In 2Q16, peers Domino’s Pizza (DPZ), Starbucks (SBUX), and Papa John’s (PZZA) are expected to post SSSG of 5.5%, 5.8%, and 2.3%, respectively.

Next, we’ll take a look at the expansion of Yum! Brands’ (YUM) business.

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