Taco Bell parent Yum Brands tops same-store sales estimates

(Reuters) -Yum Brands on Wednesday topped Wall Street estimates for third-quarter sales as inflation continues to weigh on budgets, prompting more consumers to turn to Taco Bell and KFC for cheaper restaurant meals.

The company’s shares, however, fell about 2% in premarket trading as sales at Pizza Hut came in weaker than expectations.

Yum Brands has banked on aggressive promotions and limited-time offers across its brands to attract customers. It brought back the fan-favorite Volcano Menu at Taco Bell in the quarter, while KFC launched a $20 Fill Up Box deal offering a family meal including 12-piece nuggets, fries and biscuits.

The company’s strategy to lean on offers has helped its brands offset an industry-wide slowdown in traffic. Overall dining traffic fell throughout the quarter, but Taco Bell saw visits increase 3%, according to data from location analytics firm Placer.ai.

Pizza Hut’s same-store sales globally rose 1%, missing estimates of 2.08%, according to LSEG data. The chain’s sales in the United States were flat.

Global same-store sales at Taco Bell restaurants rose 8% in the quarter, above estimates of an increase of 6.49%, while KFC posted an increase of 6%, compared with estimates of 5.39%.

Restaurants have benefited from a step down in costs of commodities such as vegetables, paper and some proteins like chicken, after months of struggling to protect margins from cost inflation.

Several months of price hikes taken to combat elevated costs have also helped margins. For Yum, operating margins expanded across all three of its top divisions in the third quarter ended Sept. 30.

Total same-store sales at Yum Brands rose 6% in quarter, beating analysts’ estimates of a 4.73% increase.

On an adjusted basis, Yum Brands earned $1.44 per share, beating estimates of $1.28.