© Reuters. FILE PHOTO: A Taco Bell order and drinks inside the first U.S. digital-only location in Times Square in New York City, U.S., April 14, 2021. REUTERS/Shannon Stapleton/File Photo
(Reuters) -Yum Brands on Wednesday beat 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 meals. in restaurants.
The company’s shares, however, fell about 2% in premarket trading as sales at Pizza Hut fell short of expectations.
Yum Brands has gone for aggressive promotions and limited-time offers across all its brands to attract customers. It brought back the fan-favorite Volcano menu at Taco Bell during the quarter, while KFC launched a $20 Fill Up Box deal that offers a family meal that includes 12-piece nuggets, chips and cookies.
The company’s strategy of leaning on deals has helped its brands offset an industry-wide traffic slowdown. Overall restaurant traffic fell during the quarter, but Taco Bell saw a 3% increase in visits, according to data from location analytics firm Placer.ai.
Pizza Hut’s global comparable sales rose 1%, missing estimates of 2.08%, according to LSEG data. The chain’s sales in the United States remained stable.
Taco Bell restaurants’ overall same-store sales rose 8% in the quarter, above estimates of a 6.49% increase, while KFC posted a 6% increase, compared to estimates from the 5.39%.
Restaurants have benefited from lower costs for raw materials such as vegetables, paper and some proteins such as chicken, after months of struggling to protect margins from cost inflation.
Several months of price increases to combat high costs have also helped margins. For Yum, operating margins expanded across its three main divisions in the third quarter ended Sept. 30.
Yum Brands’ total same-store sales rose 6% in the quarter, beating analyst estimates of a 4.73% increase.
On an adjusted basis, Yum Brands earned $1.44 per share, beating estimates of $1.28.
