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Yum Brands to reduce Pizza Hut’s dine-in operations, focus on delivery



(Reuters) – Yum Brands Inc (YUM.N) on Wednesday forecast same-store sales growth of 2 percent to 3 percent for fiscal 2019 and said it would reduce Pizza Hut’s dine-in operations as it sharpens its focus on delivery.

FILE PHOTO: A customer walks out of a KFC restaurant in Shanghai, China, October 9, 2015. REUTERS Aly Song

The company said Pizza Hut’s international dine-in assets would be cut to about 25 percent in the next three to five years from 42 percent and that it would make similar cuts in the United States.

“We are migrating out of many of our dine-in assets to delivery assets in the United States,” Chief Financial Officer David Gibbs said in an interview with Reuters.

The 60-year-old chain has been struggling with changing consumer tastes and stiff competition from other restaurant chains, mainly Domino’s Pizza Inc (DPZ.N), which has relied on its delivery business to drive growth.

Pizza Hut’s same-store sales have shown little growth since 2015, with analysts estimating a drop this year too.

Artie Starrs, president of Pizza Hut’s U.S. unit, said on the company’s investor day that he was “extremely dissatisfied” with the pizza chain, blaming its dine-in assets, and lack of innovation and creative advertising for its poor performance.

As part of a turnaround, the pizza chain is banking on its Delco outlets, which focus on delivery and carryout, and investments in new technologies.

Gibbs said Delco is a growth driver, with 90 percent of its new stores built around that model.

“(Delivery and carryout) part of the business is growing well today, that gives us a lot of hope and excitement for the future,” Gibbs said.

The Louisville, Kentucky-based company forecast full-year system sales growth in the mid-to-high single-digit range, adding that it was on track to deliver a profit of $3.75 per share in 2019.

Analysts on average were expecting same-store sales growth of 2.25 percent and a profit of $3.80 per share, according to IBES data from Refinitv.

Reporting by Nivedita Balu and Soundarya J in Bengaluru; Editing by Sriraj Kalluvila and Anil D’Silva