LOUISVILLE, KY. — Digital orders at KFC and Pizza Hut surged in the second quarter as more people ordered fried chicken and pizza online, but challenges related to the coronavirus (COVID-19) pandemic continued to weigh on parent company Yum! Brands, Inc.’s earnings during the period.
Net income for the second quarter ended June 30 was $206 billion, equal to ¢67 per share on the common stock, down from $289 billion, or ¢92 per share, in the same period a year ago. Net sales fell 8.5% to $1.2 billion.
“Our sales declines were primarily driven by temporary store closures, which peaked in early April at about 11,000 restaurants,” said David Gibbs, chief executive officer at Yum! Brands, during a July 30 conference call with analysts.
Closures have now fallen to less than 2,500 units, meaning around 95% of the system is open for business in full or limited capacity, according to the company.
“The remaining closed stores are dispersed around the globe with about 70% located in malls, transportation centers, airports and the like,” Mr. Gibbs said. “We're encouraged that when our stores are open, customer trust and demand are high. This is true even though the majority of our dining rooms have been and remained closed, highlighting the importance of executing the off-premises occasion well.”
Digital sales grew to an all-time high of $3.5 billion during the quarter, accounting for more than 30% of total sales, up more than $1 billion from the same period a year ago.
“Digital sales were a big driver of the dramatic improvement in sales from the initial impact of COVID-19,” Mr. Gibbs said. “We now have over 34,000 restaurants offering delivery around the world, representing a 13% increase year-over-year, in part driven by expanded aggregator partnerships.”
Same-store sales were down 15% system-wide and 8% at Taco Bell but were up 7% at KFC and 5% at Pizza Hut in the United States.
“A lot of the gains at Pizza Hut and KFC have been from the fact that they offer great family meal solutions, which is right for these times,” Mr. Gibbs said.
It was an “eventful” full first quarter for Yum’s newest brand, Habit Burger Grill, he added.
“COVID-19 significantly impacted Habit sales just as we were closing on the acquisition in mid-March,” Mr. Gibbs said. “With over half of sales typically coming from dine-in and temporary closures running at approximately 10% of Habits throughout the quarter, they faced a massive headwind.”
Same-store sales were down 18% in the quarter, mostly due to temporary closures, while open stores trended flat.
Yum! Brands is doubling down on efforts to grow awareness around the brand’s new digital access options, which accounted for 40% of sales in the second quarter. It also aims to replicate Pizza Hut and KFC’s success with family meal solutions, including a $30 dinner special.
“None of us could have imagined how Q2 would play out when we made the decision to acquire Habit, but I'm more confident than ever that the brand and the team will create a new long-term growth opportunity,” Mr. Gibbs said.