Yum blames Pizza Hut's problems on weak image for delivery

AP News
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Posted: Feb 09, 2017 1:17 PM
Yum blames Pizza Hut's problems on weak image for delivery

NEW YORK (AP) — Pizza Hut is struggling, and executives are blaming its reputation for being more of a sit-down restaurant than a delivery chain.

Yum Brands Inc. said Thursday that Pizza Hut's sales slid 4 percent at established U.S. locations in the last three months of 2016. The company said it has brought in outside experts to address issues such as digital ordering, delivery times and the physical stores — half of which have dine-in areas or the chain's signature red roofs.

The Louisville, Kentucky-based company reported stronger sales for its KFC and Taco Bell chains, and its profit was better than Wall Street expected as it worked on cutting costs.

Still, Yum acknowledged that Pizza Hut's results were not acceptable. Rivals Domino's and Papa John's are known for being delivery chains, and have increased sales by making it easier to order online or on mobile phones. That reflects a push across the fast-food industry to offer more convenient ways to order and pick up food.

For Pizza Hut, part of the challenge is that its franchisees are using several different point-of-sales systems to ring up orders, said Sara Senatore, a Bernstein analyst.

"It makes everything more expensive and slower to do," she said, noting that the company might have to tailor digital coupons or loyalty program for multiple systems.

Yum has said that franchisees should be on a uniform system by the end of 2017, Senatore noted.

Yum Brands CEO Greg Creed has talked about his realization that "easy beats better" — meaning that people increasingly want convenience above else. That's a problem for Pizza Hut because many do not think of it for delivery, which has become a more attractive option than eating out for many.

"We still have to turn Pizza Hut into a delivery brand," Creed said during a conference call with analysts Thursday.

The U.S. market accounts for about half of Pizza Hut's global sales. The chain's sales also declined 2 percent at established locations in international emerging markets during the quarter, and were flat in international developed markets.

Yum last year spun off its China division, which had also struggled since a series of food scares.

Yum President David Gibbs noted KFC and Taco Bell's improved performance in the U.S. despite the difficult conditions. The NPD Group, a research firm, has said it expects the overall restaurant industry's customer traffic to remain "stalled."

For the quarter ended Dec. 31, Yum Brands Inc. earned $267 million, or 76 cents per share. Not including one-time items, it earned 79 cents per share, topping the 73 cents analysts expected.

Total revenue was $2.02 billion, which met expectations.

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