LOUISVILLE, KY. — Yum! Brands, Inc.’s third-quarter results were lifted by strength in the Taco Bell brand, which saw continued off-premises momentum even as it lost business in the breakfast daypart.
Net income for the third quarter ended Sept. 30 was $283 million, equal to 94¢ per share on the common stock, up 11% from $255 million, or 80¢ per share, in the same period a year ago. Total revenues grew 8% to $1.45 billion from $1.34 billion.
Digital sales increased by more than $1 billion for the second consecutive quarter and reached a record $4 billion.
Management attributed the increase to elevated drive-thru demand at Taco Bell, which saw 30 million more cars compared to the prior-year period. Breakfast sales, which typically make up 6% of total sales, accounted for 4%. Around half of Taco Bell locations currently offer the morning menu.
The chain also doubled down on value offerings with a new $5 Grande Nachos Box and $1 Nacho Crunch Double Stacked Taco. Demand for family-size Party Boxes increased twofold.
“Taco Bell always has their finger on the pulse of the consumer,” said David Gibbs, chief executive officer of Yum! Brands, Inc., during an Oct. 29 conference call with analysts. “They’ve recognized that we’re really in an environment where food is going from something as fuel to something a little bit more like entertainment.”
Sales at Taco Bell grew 3% in the quarter, partially offsetting a 1% decline in sales at Pizza Hut.
In the United States, Pizza Hut’s same-store sales grew 6%, with 17% of same-store sales generated by off-premises channels. The chain’s restaurant footprint fell 5% versus the prior-year period following the closure of hundreds of stores owned by NCP International, Inc., its largest US franchisee, which filed for Chapter 11 bankruptcy in July.
Pizza Hut also saw a 4% drag from closings and sales headwinds in express units, Mr. Gibbs said.
“More than 50% of the closures are our dine-in units and our express units, and that’s how we’re driving asset transformation,” he said. “While COVID has hastened the transition and the closure of casual dining-based restaurants, we still have a lot of work to do on transitioning to off-premises focused assets.”
System-wide sales at KFC were down 1% while US sales were up 5%. Drive-thru sales increased 60% year-over-year with the largest growth occurring during the lunch daypart.
The company’s investment in Grubhub lifted earnings by 2¢ per share due to changes in fair value. Yum! Brands in the third quarter sold its 3% stake in Grubhub for $206 million. The company previously had disputed the terms of its agreement with the third-party delivery platform.
“That doesn’t reflect anything about our view on the delivery space in general,” Mr. Gibbs said. “We’ve expanded out relationships with aggregators.”
Taco Bell added new delivery platforms during the quarter, he added, and 80% of KFC stores in the United States now offer the service through multiple partners.
“We want to be where our consumers want to do business with our brands,” Mr. Gibbs said. “If that’s through a delivery channel with an aggregator, we want to be there.”