Pizza Hut: C+
Parent company Yum Brands, which includes Pizza Hut, KFC and Taco Bell, has posted some solid numbers including same-store sales growth of around 5% and 11% growth in operating profit (excluding the 53rd week impact) during most recent quarter.
Pizza Hut’s recent launch of Pizza Sliders — mini pizzas that come three to a box or nine to a box and sell for $5 and $10 respectively — has a lot of potential as well, while its some 10,000 restaurants in 90 countries and its international operations — particularly in China — have long been sterling contributors for the company.
Adverse publicity over problems with some of its chicken suppliers in January, though, led to a 15% drop in Pizza Hut same-store sales and a 41% fall for KFC. YUM China Chairman and CEO Sam Su apologized publicly and has revamped its supply chain and marketing.
All in all, YUM is a solid stock with the advantages of a $29 billion market cap, diversification and a decent current dividend yield of 2.1% … but the company is facing short-term headwinds now with the China poultry problems as well as new PR problems with horsemeat found in meat at a UK Taco Bell. The food safety issues will pass, but will still weigh on earnings and same-store sales in the short term.