Slowdown in Pizza Hut sales weighs on Yum

The dining chain company Yum! Brands saw its quarterly results pulled down by a surprise drop in same-stores sales at Pizza Hut, sending the shares down in early trading.

The parent company of Taco Bell, KFC and Pizza Hut, which split off its China operations in 2016, has tried to revitalise its pizza brand amid stiff competition from Domino’s Pizza and Papa John’s International.

Yum has been trying to improve the chain’s appeal by embracing delivery, but discounts across the entire fastfood industry are making it difficult to drive growth.

Yum shares slid as much as 3.1% in early trade and are down 2.6% for 2018 to the close of trading on Wednesday.

Pizza Hut comparable sales fell 1% in the latest quarter, while analysts had projected a 1% gain, according to Consensus Metrix.

Globally, Yum’s comparable sales rose 1%, missing estimates for 1.9% growth.

In an effort to drive a turnaround, Pizza Hut has recently expanded its beerdelivery push and will look to benefit as some consumers dine less at Papa John’s after its founder and former chairman, John Schnatter, admitted to using a racial slur.

In February, Pizza Hut replaced Papa John’s as the official pizza partner of the National Football League, after an earlier controversy over Schnatter.

With Papa John’s mired in controversy, there could be an opportunity for Pizza Hut, but the firm faces challenges as it tries to update its image to focus more on delivery, according to Bloomberg Intelligence analyst Jennifer Bartashus.

“There’s something about the execution and product innovation that is not quite resonating with customers,” she said.

Taco Bell’s same-store sales also missed estimates in the quarter, climbing 2% compared with an estimate that called for 2.8% growth.

KFC gave its parent a boost, posting 2% growth in samestore sales to beat the 1.9% estimate.