Photo credit: Mike Mozart
YUM! Brands Inc. (YUM) is set to report third quarter earnings today after the closing bell.
Wall Street Analysts are calling for EPS of $1.08 and revenue of $3.71 Billion while the Estimize Consensus is expecting EPS of $1.09 and revenue of $3.72 Billion.
What China means for YUM!
YUM! Brands, home to American staples Pizza Hut, Taco Bell, and KFC, struggled last quarter due to the strong valuation of the US Dollar devaluing sales in China . Additionally, China accounts for roughly 53% of Yum's revenues.
For a firm like Yum!, there are two key measures for growth: same store sales and unit growth. Same store sales have been negatively impacted over the past year due to a food quality scandal in China in which a main supplier was caught relabeling expired meat. That lead to a quarterly same store sales decline of 10%. Competitors McDonald's (MCD) and Domino's Pizza (DPZ) also experienced drops in same stores sales. The situation in China will be a main focus this quarter, however, analysts are remaining optimistic due to the appointment of new China CEO, Micky Pant, improvements in Taco Bell operations, and the rebranding of Pizza Hut.
The Taco Bell Effect?
Last month, the fast-food chain opened two new spinoff restaurants called Taco Bell Cantina in Chicago and San Francisco, both having a special twist. The Chicago location will serve wine, sangria, beer, and Twisted Freezes (Taco Bell's version of an alcoholic frozen drink) while the San Francisco location will sell wine and beer. The food selection was inspired by tapas, the shareable snacks in Spanish cuisine, and neither location will have drive-thrus, but will offer mobile ordering.
YUM data by YCharts
Taco Bell has stated that this new idea is meant to market towards millennials and will monitor the success of the chains. Investors should be keen on learning how these new branches will affect the overall sales of YUM! In addition, Taco Bell has also recently introduced a complete certified vegetarian menu to keep and attract vegetarian customers. Taco Bell is also the 1st fast-food company to have a certified vegetarian menu.
