Yum! Brands is considering selling off struggling chain Pizza Hut
The fast-casual veteran faces a crowded market and “pizza fatigue,” just as sales at sister brand Taco Bell are soaring.
In recent years, 67-year-old chain Pizza Hut has fallen behind rival Domino’s in the ’za-making stakes. But now, it looks like the Hut might no longer even have a place in its parent company’s portfolio.
As Yum! Brands reported strong third-quarter earnings on Tuesday, with revenue and net income beating expectations, the company also announced that it will be exploring a “range of strategic options” for Pizza Hut to help the brand “realize its full value.” In corporate breakup speak, that could well mean a potential sale.
However you slice it...
Even after unveiling a new logo just weeks ago (which was certainly better received than some other rebrands of late), Pizza Hut has continued to cool off, with system sales stagnating in the most recent quarter — brought down, crucially, by a 7% decline in the US — and operating profit falling 8%.
Boasting almost 20,000 stores globally, Pizza Hut’s per-unit sales worked out at ~$160,000 in Q3. However, when it comes to supersized margins, one brand in the Yum! family reigns supreme.
Despite having roughly half as many stores as Pizza Hut worldwide, and about a quarter of KFC’s restaurant tally, Taco Bell pulled in over 3x the amount of operating profit as the Hut in Q3, and a little more than two-thirds of what KFC hauled, too — a clear reflection of how reliable an engine the Mexican-inspired chain has become for Yum! Brands.
Taco the town
While KFC remains the group’s largest brand — with the finger lickin’ chicken chain reporting growing sales as its “comeback era” sees it contend with rivals in the competitive poultry space — Taco Bell is winning over inflation-squeezed consumers with cheap offerings and drive-thru prowess.
Even so, Pizza Hut’s problems might not be easily solved with a new logo and value options. Indeed, America may be feeling “pizza fatigue” more broadly, as pandemic-era demand drops off and delivery apps like DoorDash broaden options. Meanwhile, private equity firm Apollo Global withdrew its take-private offer for competitor Papa John’s on Tuesday, ahead of earnings later this week.
