LOUISVILLE, KY. — Already owning delivery experience through its Pizza Hut brand, Yum! Brands, Inc. still is in a yellow-flag, cautious mode when it comes to delivery for Taco Bell and KFC. A scaleup in the marketing of delivery services for those two brands could get the green light soon, though.
Louisville-based Yum! Brands and Grubhub, an online and mobile takeout food-ordering company, announced their partnership in February to drive incremental sales to KFC and Taco Bell restaurants in the United States. The partnership is still in its “early days,” said Greg Creed, chief executive officer of Yum! Brands, Inc., in an Aug. 2 earnings call to discuss second-quarter financial results.
“We are seeing what you'd expect us to see, which is incremental transactions,” he said. “We are seeing higher check. We've not unleashed the marketing muscle behind it, so we think there’s a lot more transaction growth to get, but the transactions appear to be incremental at a much higher check.”
Yum! Brands wants to get the delivery integration done right and test it before unleashing marketing dollars, Mr. Creed said.
“We’re fairly sophisticated when it comes to the subject of delivery,” said David W. Gibbs, president and chief financial officer for Yum! Brands. “We know delivery well from our Pizza Hut business. So getting Taco Bell and KFC in, we have very high standards for where we want to ultimately get to … We’re pleased with where we’re at right now on the journey. We know what ultimately the kinds of times and accuracy that you need to deliver in delivery. We’re not there yet, but we’re on that path to getting there with Grub right now.”
Yum! Brands in the second quarter ended June 30 posted net income of $321 million, or 99c per share on the common stock, which was up 56% from $206 million, or 59c per share, in the previous year’s second quarter. Total revenues of $1,368 million were down 6% from $1,448 million. Same-store sales were up 1%.
Mr. Gibbs said four items weighed on second-quarter core operating profit results: a timing mismatch between general and administrative savings and refranchising, a revenue recognition accounting standard change, KFC distributor disruption in the United Kingdom, and the lap of some one-time benefits at KFC. As a result, core operating profit declined 6%.
Chicken delivery issues in the second quarter forced some KFC restaurants in the United Kingdom to go without chicken for a short while.
“All of our stores in the U.K. opened for business offering their full menus beginning mid-May, with advertising beginning at the end of May,” Mr. Gibbs said.
KFC systemwide in the second quarter reported operating profit of $235 million, which was down 3% from $243 million in the previous year’s second quarter. Sales of $6,306 million were up 9% from $5,771 million.
Taco Bell in the second quarter had operating profit of $149 million, down 2% from $152 million, and sales of $2,489 million, up 5% from $2,373 million. Same-store sales increased 2%.
Pizza Hut in the second quarter had operating profit of $81 million, down 5% from $85 million, and sales of $2,894 million, up 2% from $2,827 million. Same-store sales were down 1%.
For the six months ended June 30, Yum! Brands had net income of $754 million, or $2.30 per share on the common stock, which was up 55% from $486 million, or $1.37 per share, during the same time of the previous year. Six-month total revenues of $2,739 million were down 4% from $2,865 million.