It’s Time to Double Down on Yum! Brands

New menu items by KFC, Pizza Hut, and Taco Bell will drive sales and help Yum! deliver its goal of 20% earnings growth.

Apr 29, 2014 at 7:00AM

Yum! Brands (NYSE:YUM) looks poised to increase sales at all three of its brands: KFC is bringing back the Double Down, Taco Bell has a new breakfast menu, and Pizza Hut has WingStreet. Yum! Brands is certainly not afraid to try new ideas, which illustrates management's ability to overcome adversity, especially after the challenges the company faced in China over the last few quarters.

Considering that Yum! Brands has more than 40,000 restaurants globally compared to McDonald's (NYSE:MCD) 35,000 locations, can these new menu items help Yum! Brands catch up to McDonald's in total sales?

Solid first-quarter results
In the first quarter, Yum! Brands posted earnings per share of $0.87, $0.02 better than expected and $0.17 higher than last year's first quarter. While total revenue rose 7.1% year over year to $2.7 billion, it was still lower than the $6.7 billion in revenue that McDonald's recorded in the same quarter.


Source: Yum! Brands

In terms of same-store sales growth, the China division led the way with a 9% increase. KFC saw a 1% rise in same-store sales; Pizza Hut recorded a 2% decrease, and Taco Bell saw a 1% decline in same-store sales.

McDonald's first quarter was not that great
For McDonald's, the first quarter was a disappointment. Even though same-store sales rose 0.5% globally, they were down 1.7% in the U.S. First-quarter earnings per share were $0.03 lower than expected and $0.05 lower than last year. Total revenue was just 1% higher than last year.


Source: Wikimedia Commons

McDonald's expects April's global same-store sales to be positive as the weather improves. McDonald's blamed the weather for the sales weakness it experienced in the first quarter. This year, McDonald's plans to open 1,500 new restaurants.

New menu items expected to boost sales for Yum! Brands
Yum! Brands is counting on new menu items from KFC, Taco Bell, and Pizza Hut to boost sales. If the new menu items can drive traffic into its stores, Yum! Brands hopes to capture sales that ordinarily would have gone to a competitor like McDonald's.

For KFC, the company is looking for the KFC Double Down to boost sales like the item did when it was first introduced back in 2010. In its first month, KFC sold more than 10 million Double Downs. The Double Down is certainly a unique menu item. It consists of bacon, Monterey Jack cheese, and the Colonel's sauce between two 100% white meat KFC chicken fillets.


Source: KFC

Pizza Hut is looking for new Garlic Parmesan Pizza and Buffalo wings from WingStreet to increase sales. I think WingStreet has potential for Pizza Hut, and I discussed the possibilities in "Can Pizza Hut's WingStreet Take Down Buffalo Wild Wings? Here's Why It Matters." The new Garlic Parmesan Pizza comes in three distinct flavors for $10 -- Chicken Bacon Tomato, Roasted Veggie, and Five Cheese.

Taco Bell's focus has been on its new breakfast menu and going head-to-head with McDonald's during breakfast hours. The new breakfast items include Cinnabon Delights, Waffle Tacos, Breakfast Burritos, A.M. Crunchwraps, and A.M. Grilled Tacos. Taco Bell has also launched an aggressive marketing campaign to raise awareness. According to Yum! Brands CEO David Novak, Taco Bell's breakfast is "off to a great start."


Source: Taco Bell

What about McDonald's menu?
To fend off the challenge from Taco Bell and its new breakfast menu, McDonald's offered a free small McCafe coffee and advertised the McGriddle to go up against Taco Bell's Waffle Taco. A McGriddle consists of two small pancakes made with maple flavoring; it comes in three varieties -- Bacon, Egg, and Cheese McGriddles, Sausage McGriddles, and Sausage, Egg, and Cheese McGriddles. The big advantages that McDonald's has during the breakfast hours are that the chain has been running its breakfast menu the longest, and McDonald's has become part of the daily routine for most consumers. This is the biggest challenge Taco Bell faces and explains the aggressive advertising push.

How do shares compare?


Market Cap

Forward P/E

1-Year Return

Dividend Yield

Yum! Brands

$34.02 B





$98.13 B




Source: Yahoo! Finance

Foolish final thoughts
I like the moves Yum! Brands and its CEO David Novak are making. He knows that innovative menu items are needed to help drive traffic, and he is focused on boosting sales at KFC, Taco Bell, and Pizza Hut. This year, he expects to deliver 20% earnings-per share growth. With shares trading at 18 times next year's earnings, I think shares of Yum! Brands are set to deliver for shareholders.

Will this stock be your next ten-bagger?
Give me five minutes and I'll show how you could own the best stock for 2014. Every year, The Motley Fool's chief investment officer hand-picks 1 stock with amazing potential. But it's not just any run-of-the-mill company. It's a stock perfectly positioned to cash in on the upcoming year's most lucrative trends. Last year his pick skyrocketed 134%. And previous top picks have gained upwards of 908%, 1,252% and 1,303%! Believe me, you don't want to miss what could be his biggest winner yet! Just click here to download your free copy of "The Motley Fool's Top Stock for 2014" today.

Mark Yagalla has no position in any stocks mentioned. The Motley Fool recommends McDonald's. The Motley Fool owns shares of McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers