YUM stock is in the red today after Yum! Brands (NYSE:YUM), the parent company of Taco Bell and KFC, released quarterly earnings that fell short of analysts’ expectations.
While third-quarter revenue of $1.34 billion USD was in line with analysts’ expectations, same-store sales from across the company’s three major chains, which also includes Pizza Hut, were disappointing. Adjusted earnings per share came in at 80 cents, which also fell short of the 94 cents that had been expected. YUM stock tumbled nearly 10% in early Wednesday trading.
The company has said that changing the fair value of its GrubHub investment weighed down the EPS figure. YUM purchased a 3% stake in the food delivery firm last year, but it has since struggled to compete in a fiercely condensed field alongside the likes of UberEats and Door Dash. Yesterday, GRUB stock slumped to a new low after the company reported a profit of just $1 million USD in the quarter, compounding today’s decline in YUM shares.
Pizza Hut has also been weighing on Yum’s earnings, faring the worst out of its three chains. The company has been trying to turn around the flailing pizza chain, reporting last quarter that it could close as much as 400 locations in a major restructuring project. CEO Greg Creed, who will leave that position at the end of the year, warned investors that volatility in YUM stock should be expected in the short term as the company reshuffles the packs. “Of course, this transition will undoubtedly lead to some disruption and choppiness in the short term,” said Creed.
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Yum’s earnings call comes just days after Restaurant Brands International Inc (TSX:QSR) (NYSE:QSR), the parent company of Tim Hortons and Burger King, reported its quarterly earnings. Similarly, same-store sales at Tim Hortons weighed on the earnings just as Pizza Hut did for Yum. While QSR stock dropped 3.6% after the release of its results, it has since recovered slightly. Investors in YUM shares will be hoping for a similar effect.
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