Pizzeria chain Pizza Hut’s sales could use a few more toppings.
Parent company Yum Brands (YUM) said on Wednesday that sales at Pizza Hut stores open at least a year fell 3% in the second quarter, an unexpected drop as analysts were anticipating a small 0.1% increase, according to Consensus Metrix,
Pizza Hut, which analysts say is operating dated stores and offering very little in the way of innovation, has been facing tough competition from all corners. Archrival Domino’s Pizza (DPZ) has been discounting aggressively, and, for example, is currently offering pizzas with two-toppings for $5.99. Meanwhile, other restaurant chains are muscling in on Pizza Hut’s turf: In December, Chipotle Mexican Grill (CMG) took a stake in a small chain called Pizzeria Locale, and is adding new outlets. And Buffalo Wild Wings invested in the pizza restaurant chain PizzaRev.
“At Pizza Hut, although second-quarter results were disappointing, we are taking significant actions in our U.S. business to reignite sales and expect to make substantial progress” by the end of the year, CEO David Novak said in a statement. This week, Pizza Hut announced that it would sell an eight-inch pizza-shaped chocolate chip cookie to entice customers who are just racing in and out of its restaurants. Papa John’s introduced a similar dessert last year.
Pizza Hut wasn’t Yum’s only trouble spot. Its Taco Bell chain also had a disappointing showing in the quarter ending June 14. Comparable sales rose 2%, below analyst estimates for a 3.6% increase.
On the bright side, Yum’s KFC fried chicken restaurant chain seemed to be finally regaining favor with customers in China, where Yum gets about half of its revenue. China same-store sales rose 15%, well above the 11% analysts forecast. Yum’s sales in China went into free-fall last year after an outbreak of avian flu. The company has been trying to reassure Chinese customers that its restaurant are safe, and those efforts appear to be working as shown by a three-fold gain in its operating profits in that market.
