Strong demand at Taco Bell drives Yum Brands' profit beat

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[May 03, 2017]  (Reuters) - Yum Brands Inc reported a better-than-expected quarterly profit due to strong global same-store sales growth, driven by robust demand at its Taco Bell restaurants and lower costs at its KFC chain.

The sign at a Pizza Hut location, which is owned by Yum Brands Inc, is pictured ahead of their company results in Pasadena, California U.S., July 11, 2016. REUTERS/Mario Anzuoni/File Photo

Shares of the company were up 3 percent at $68.40 before the bell on Wednesday.

Sales rose 8 percent at Taco Bell restaurants open for more than a year, topping the 3.7 percent growth expected by analysts polled by research firm Consensus Metrix.

Taco Bell performed well in the quarter by avoiding over discounting and through the successful launch of the Naked Chicken Chalupa, a taco with a shell made of chicken, Morningstar analysts wrote in a pre-earnings note.

While KFC's same-store sales growth of 2 percent missed analysts' estimates, its operating profit jumped 12 percent on lower costs and as it sold more restaurants to franchisees.

Pizza Hut continued to struggle, reporting a 3 percent drop in same-store sales, its third straight quarterly decline, even as rival Domino's Pizza Inc <DPZ.N> last week reported domestic growth of 10.2 percent.

Yum Brands' income from continuing operations rose to $280 million, or 77 cents per share, in the first quarter ended March 31, from $226 million, or 54 cents per share.

Excluding items, the company earned 65 cents per share, beating the average analyst estimate of 60 cents per share, according to Thomson Reuters I/B/E/S.

Total revenue fell 1.8 percent to $1.42 billion as it sold more restaurants to franchisees but managed to beat Street expectations of $1.35 billion.

(Reporting by Sruthi Ramakrishnan in Bengaluru and Lisa Baertlein in Los Angeles; Editing by Supriya Kurane and Saumyadeb Chakrabarty)

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