Yum! Brands taking 'bold steps' at Pizza Hut

by Monica Watrous
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Pizza Hut mobile ordering
Pizza Hut plans to focus on streamlined digital ordering.
 

LOUISVILLE, KY. — The key to fixing Pizza Hut, said Yum! Brands chief executive Greg Creed, is not a new menu item or marketing overhaul, strategies that helped reignite sales at sister brands Taco Bell and KFC in recent years. The solution, he said, is making it easier for customers to order a pizza.

Greg Creed, Yum! Brands
Greg Creed, c.e.o. of Yum! Brands

“I think the answer is, just like everything in life, we have to be easy and we have to be better,” Mr. Creed said during an Aug. 3 earnings call with investment analysts. “So, we’re working on the easy components, whether that’s all the technology, the digital play, whether that’s loyalty. And at the same time, we’re obviously continuing to work on making sure we have the best pizza in the marketplace.

“I think a combination of both of those will see us sort of build the Pizza Hut brand back into the brand we want it to be.”

Pizza Hut’s U.S. business represents approximately 10% of Yum! Brands’ operating profit. A $130 million transformation effort is under way to improve the segment’s performance by adopting a “digital, delivery-centric model.” Components of this initiative recently have included plans to hire 14,000 new delivery drivers across the system by the end of the year and the introduction of a first-of-its-kind loyalty program.

Pizza Hut delivery driver
Pizza Hut plans to hire approximately 14,000 drivers this year.
 

The company also inked an agreement with franchisees in May that will increase national advertising and build awareness of the chain’s efforts around digital and delivery, Mr. Creed said.

“The brand remains on track to effectively be on one point-of-sale system by the end of the year, which will allow Pizza Hut to drive efficiency in its ability to improve its operations around delivery and speed to market on digital implementations,” he added.

In the recent quarter, Pizza Hut same-store sales declined 1%, which included a 3% decline in Pizza Hut U.S. same-store sales. Meanwhile, same-store sales increased 4% at Taco Bell and 3% at KFC.

Pizza Hut pizza
Pizza Hut’s U.S. business represents approximately 10% of Yum! Brands’ operating profit.
 

Consolidated net income for Yum! Brands Inc. in the second quarter ended June 30 was $206 million, equal to 59c per share on the common stock, down 39% from $336 million, or 64c, in the year-ago period. Revenues totaled $1,448 million, down 4% from $1,509 million.

Excluding special items, adjusted earnings per share advanced 21% over the prior year, and core operating profit grew 19%, Mr. Creed said.

“System sales grew 6%, comprised of 2% same-store sales growth and 3% net new unit development,” he said. “The underlying base rate of growth in our business, both in terms of sales trends and profit contribution, continued to track in line with our plans and longer-term goals.”

Pizza Hut mobile delivery tracker
Pizza Hut is adopting a "digital, delivery-centric model.”
 

Yum! Brands reiterated its full-year guidance and continues to expect at least 5% system sales growth over last year.

As for the Pizza Hut business, Mr. Creed said, “While we do not expect the transformation agreement to yield results overnight, we do expect to see improvement over time… I'm confident these bold steps will pay big dividends for the Pizza Hut brand over the long term.” 
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