Pizza Hut’s parent explores sale of struggling chain

Yum! Brands is exploring a possible sale of its Pizza Hut chain, as the business struggles to compete with rivals in the pizza business to win over cash-strapped consumers.

Pizza Hut has reported several quarters of declining same-store sales in the US – a market that makes up 42% of its global sales. The US woes have dragged down the business, even as sales rise in some other markets.

“Pizza Hut’s performance indicates the need to take additional action to help the brand realise its full value, which may be better executed outside of Yum! Brands,” chief executive Chris Turner said in a statement on Tuesday.

He added “strategic options” were being examined for its pizza division.

Pizza Hut, which saw sales at its existing outlets fall 1% overall in the most recent quarter, has lagged behind other big names in the Yum! portfolio. Notably, KFC and Taco Bell, which is known for its low-price meals, have both shown signs of strength.

Taco Bell’s same-store sales rose 7% in the most recent quarter, while same-store sales at KFC increased 3% despite recent challenges in the US.

Yum! generates about 11% of its operating profits from its Pizza Hut business. It operates roughly 20,000 Pizza Hut stores globally, about 6,500 of which are located in the US.

Competitors in the pizza market, like Papa Johns and Domino’s Pizza, also continue to grab market share, contributing to Pizza Hut’s struggles to stay competitive. Domino’s last month reported that its quarterly sales role 6%, which executives attributed in part to promotions.

Mr Turner, who took the helm of Yum! last month, said Pizza Hut employees have been “working hard to address business and category challenges”.

Yum! did not specify when the company will make a decision about what comes next for the Pizza Hut brand.

Beyond competition in the pizza business, Yum has faced a pullback in spending among consumers weighed down by persistent inflation and a slowdown in the labour market.

The trend of cautious spending has affected the fast-food restaurant industry as a whole in recent months. Last week, an executive at the burrito chain Chipotle said younger consumers in particular are showing sign of strain, stemming from unemployment and loan repayments.

On a call with analysts on Tuesday, Mr Turner of Yum! referred to US consumers as “cautious but incredibly resilient”. He said spending at Taco Bell has held up despite macroeconomic pressures.

In the UK, Pizza Hut is closing half of its restaurants as consumers in that market shy away from the chain, too. Over time, Pizza Hut’s market has been sliced up and distributed to its trendier, more nimble rivals.