Global quick-service restaurant (QSR) firm
) posted Q2 earnings after the bell Wednesday, where top and bottom
line results matched Zacks consensus estimates of 73 cents per
share on $3.2 billion in sales. YUM shares are selling down in the
after-market on the news.
While better-than-expected growth in its extremely important China
region was the good news for Yum!, the bad news was that
year-over-year Q2 comparable store sales ("comps") came short of
expectations for two of the company's three components: Pizza Hut
fell 3% (+0.1% was estimated) and Taco Bell comps gained 2% (3.6%
Nearly half of Yum!'s total revenues come from China, so its 15%
comps year over year is a welcome sight for investors. In fact,
Yum! Brands is often cited as a good way to gauge how well the
Chinese consumer is doing economically, as Yum! restaurants --
particularly KFC -- are extremely popular in China.
The problem for the company is clearly on the domestic side, where
more-nutritious eating habits for the American consumer, along with
loads of QSR competition in the U.S., are taking a "bite" out of
Yum! Brands' sales. Comps were down for Yum! in Q1 as well, though
this was then attributed mostly to poor weather in the winter
months of early 2014.
Yum!'s Q2 conference call is scheduled for tomorrow morning, so
we're sure to hear lots of questions about how domestic restaurants
planning on combatting weakening market share. Taco Bell, for
instance, has been expanding into more breakfast options, and its
Cantina Power Menu launches on Thursday. But unless YUM is planning
on marketing pizza and fried chicken for breakfast, it's tough to
see how this build-out will have a broader effect.
Especially considering that today, YUM shares hit their all-time
highs. Sure, a turnaround in China is welcome news, but Yum!'s
board has got a lot to swallow currently. Yum! Brands is trading
down roughly 2.6% in late Wednesday trading.
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