Yum Looks To Wings To Boost Pizza Hut Sales

(Wednesday, October 10, 2007) - The parent of Dallas-based Pizza Hut is counting on a wing and a plan to boost sales at the pizza restaurants.
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Speaking to analysts early Tuesday, David C. Novak, chairman and chief executive of Louisville-based Yum Brands Inc., said he met recently with Pizza Hut franchise leaders to encourage adding Yum's Wing Street chicken operations to more restaurants.

"We want to really leverage our Wing Street brand on a national basis," Mr. Novak said a day after Yum posted a 17 percent gain in third-quarter earnings. "That gives us a chicken platform at Pizza Hut that we've never had before."

The company did not break out revenue and income numbers for Pizza Hut but said the entire company's same-store sales were off 1 percent in the United States due largely to a 6 percent decline at Taco Bell.

Sales dropped at the company's Mexican-themed brand after an E. coli outbreak last November sickened more than 70 customers in the Northeast. Then, this spring, the company had to live down widely circulated video images of rats scampering about in a New York City Taco Bell.

Mr. Novak said it was taking the company longer than anticipated to recover.

On the Pizza Hut side, sales have been slack as competitors appealed to consumers with a more "value" focused message, analysts have said.

"Pizza Hut has been our ... problem child," said Mr. Novak. But, he said, "we've made a lot of progress there."

Adding more Wing Streets – there are 1,000 today – could help energize the pizza franchise, he said.

"This is a brand that we created for Pizza Hut," said Mr. Novak. The brand sells chicken wings in flavors such as Buffalo Burnin' Hot, honey barbecue and garlic parmesan.

Yum, which also owns KFC, Long John Silver's and A&W, reported third-quarter net income of $270 million, up from $230 million a year ago.

The profit gains came mainly from Yum's fast-growing international and China divisions, leaving the company once again apologizing for the sluggishness stateside.

"The U.S. business ... has not been a big part of our growth platform," said Mr. Novak. "We want to build a world-class business in the U.S., to go with the global business."

Investors pushed Yum shares to a 52-week high of $38.34 in midday trading Tuesday. The stock closed up $1.82 – about 5 percent – at $38.11.

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