Yum Brands Inc. (YUM, Financial) released its first-quarter 2021 financial results before the market opened on April 28.
The company's top and bottom lines surpassed analysts' expectations, but same-store sales growth was weak. Shares were up less than 1% in pre-market trading following the earnings announcement.
Earnings overview
The restaurant operator, which owns the Taco Bell, KFC and Pizza Hut brands, reported first-quarter adjusted earnings per share of $1.07, which exceeded analysts' estimates of $0.87. Revenue stood at $1.49 billion, which was up 18% year over year and surpassed expectations of $1.45 billion. On the global front, the company recorded comps growth of 9%.
Reflecting on the latest quarter and how digital sales made up for some of the losses from physical stores, CEO David Gibbs said:
"First-quarter results reflect encouraging momentum across our business, including solid 2-year same-store sales growth and a meaningful uplift in unit development, underpinned by the focus and collaboration of our franchise partners and restaurant teams around the world. During the quarter we took important steps to further boost our digital and marketing capabilities through the acquisitions of two technology-focused companies that will enhance our ability to grow our sales overnight and our brands over time."
Looking back further, the company's digital sales in 2020 reached a record $20 billion, up roughly 45% as compared to 2019, which is testament to the company's ability to quickly meet new customer needs.
Segment details
KFC, the company's largest brand, recorded 8% growth in same-store sales from the year-ago quarter. Likewise, the operating margin expanded 8.4 percentage points to 48.1% as the international franchise's bad debt recoveries were more than offset by higher general and administrative expenses. The segment posted 13% growth in systemwide sales in the U.S. In China, systemwide sales were up 24%, barring currency translations.
Pizza Hut's quarterly comparable store sales were up 12%, which is an improvement from the 1% decline reported in the previous quarter. Given the same-store sales growth and lower bad debt expense, the operating margin surged 8 percentage points to 40.7%. The segment saw systemwide sales growth of 8% in the U.S., while in China, the metric skyrocketed 57%.
Taco Bell reported a 9% increase in same-store sales worldwide. The sector's operating margin increased 4.7 percentage points to 36.4%, driven by lower general and administrative costs as well as franchise and property expenses and higher international comps.
Key developments
The company has expanded delivery to 35,000 restaurants through aggregator partnerships. Yum is focusing more on multiple partnerships rather than single partnerships as the former allows customers to order from whichever channel they prefer.
At the quarter's end, almost all of Yum restaurants were operational. During the quarter, the company opened 435 net new restaurants.
Disclosure: I do not hold any positions in the stocks mentioned.
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