:max_bytes(150000):strip_icc()/GettyImages-2113014162-cda497b7c9cf497ba4df18352ceafb74.jpg "Pizza Hut Is Shutting 250 Restaurants. Here’s Why.")
:max_bytes(150000):strip_icc():format(jpeg)/GettyImages-2113014162-cda497b7c9cf497ba4df18352ceafb74.jpg)
Key Takeaways
- Yum! Brands is closing 250 of 20,000 U.S. Pizza Hut locations after several quarters of declining same-store sales.
- The company has undertaken a “strategic review” of the brand, which will weigh several strategies, including selling the pizza chain.
Yum! is tearing off a slice of its pizza portfolio.
The fast-food giant will close 250 of 20,000 domestic Pizza Hut locations in the first half of the year, Yum! Brands (YUM) said on a conference call Wednesday. The restaurateur’s other brands, including Taco Bell and KFC, are performing well, but Yum! floated the idea of selling Pizza Hut while announcing a strategic review of the brand in November.
On the call, executives declined to share details about Pizza Hut’s future, citing the review. But the company estimated Pizza Hut’s core operating profit will fall 15% in the first quarter as the company invests in new marketing and other attempts to lift sales.
Why This News Matters to Investors
Fast-food companies have been rolling out additional value offerings to entice consumers who they say are looking to curtail their spending. This includes McDonald’s, Wendy’s and Yum! Brands’ Taco Bell.
“We have aligned stakeholders on a targeted program in the US, Hut Forward, that represents a bridge to a longer-term acceleration of the brand,” said Yum! Brands CFO Ranjith Roy, according to a transcript made available by AlphaSense. “This program includes alignment on a vibrant marketing program, modernization of certain technology and franchise agreements, and Yum! providing a onetime contribution to marketing support, along with the approval of some targeted closures of underperforming units.”
Yum! didn’t respond to questions about which locations will close and how they were selected in time for publication.
The company’s overall numbers came in close to expectations. Yum! reported $2.5 billion in revenue—a 6% increase over last year and slightly less than analysts anticipated, according to consensus estimates from Visible Alpha. That amounted to about $1.73 in adjusted earnings per share, which was in line with the consensus estimate from Visible Alpha.
Greater competition in the sector and consumers’ hunger for value have weighed on Pizza Hut sales, the company said in April. The brand had a 3% year-over-year decline in domestic same-store sales in the fourth quarter, which followed 6% and 5% drops in earlier quarters of the year, according to press releases.
Yum! Brand shares were up about 1% in late trading Thursday and have gained some 22% over the past year.
