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Why Yum! Brands’ Revenue Fell in the First Quarter

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First-quarter revenue

Yum! Brands (YUM) reported revenue of $1.25 billion in the first quarter of 2019, which represented a fall of 8.5% from $1.56 billion in the first quarter of 2018. Due to refranchising, the overall unit count of its company-owned restaurants fell by 488 units, which led to a fall in its revenue. However, the company’s SSSG (same-store sales growth) of 4.0% and its net addition of 3,622 franchised restaurants offset some of the fall.

Let’s look at the performances of Yum! Brands’ three brands: KFC, Pizza Hut, and Taco Bell.

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KFC

In the first quarter, KFC posted revenue of $566 million, a fall of 14.0% from $658 million in the first quarter of 2018. In the last four quarters, the unit count of KFC’s company-owned restaurants fell by 298, leading to a fall in the brand’s revenue. However, its SSSG of 5.0% and its net addition of 1,540 franchised restaurants offset some of the declines in its revenue in the period.

Pizza Hut

During the quarter, Pizza Hut’s revenue fell 3.2% to $243 million due to refranchising. In the last four quarters, the unit count of Pizza Hut’s company-owned restaurants fell by 58, leading to a fall in its revenue. However, the net addition of 1,728 franchised restaurants offset some of the fall in the brand’s revenue. The brand’s SSSG was flat in the quarter.

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Taco Bell

Taco Bell’s revenue fell 3.7% to $445 million in the first quarter. Due to refranchising, the unit count of Taco Bell’s company-owned restaurants fell by 132, leading to a fall in its revenue. However, its net addition of 354 franchised restaurants and its SSSG of 4.0% offset some of the fall.

Peer comparison

During the comparable quarter, Domino’s Pizza’s (DPZ) revenue rose 6.4%. Analysts expect Papa John’s (PZZA) revenue to fall 9.8%.

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