Yum aims to fatten up by doubling Taco Bell sales
Can it hit $14 billion by 2021? Some analysts think that's doable.
The trade publication says it got that target from two analysts who attended the company's recent meeting for investors. Yum executives projected that average sales at Taco Bell locations would increase to $1.8 million by the end of the decade from $1.3 million in the past fiscal year. In addition, the number of Taco Bell stores would surge to 8,000 from 5,700 during the same time.
Doubling the chain's current $7 billion in sales by 2021 could be a tonic for Yum's stock price, which has been lagging over concerns about the company's business problems in China.
Analysts who attended the meeting were bullish on Taco Bell's prospects as the company adds new menu items, such as loaded Grillers, along with breakfast, which it plans to roll out next year after a successful test in the West, the trade publication says.
Key to Taco Bell's success has been the Doritos Locos Tacos, of which the company sells 1 million a day, according to media reports. Earlier this year, the chain even argued that Doritos Locos Tacos, which recently added a Cool Ranch variety, helped create 15,000 jobs. A man incarcerated in federal prison has even sued Yum for allegedly "stealing" the idea for the product from him, a claim the company says is without merit.
How long the strength in Taco Bell, which accounts for about 20% of Yum's annual profit, can overcome the weaknesses in the rest of Yum is hard to say. During the past quarter, Taco Bell's U.S. same-store sales, a key metric of performance at locations open at least a year, rose 6%. Pizza Hut and KFC, the company's two other chains, posted declines.
Yum's China business fared even worse as the company tried to counter public concern about the safety of its foods. Same-store sales there plunged 20% in the most recent quarter.
Shares of Yum have gained about 4% this year, underperforming rivals such as McDonald's (MCD) and Burger King (BKW), which each posted double-digit gains. The average 52-week price target on Yum is $72.33, about 5% higher than where it currently trades. Analysts are betting that customers will keep ordering those Doritos Locos Tacos.
Jonathan Berr owns shares of McDonald's. Follow him on Twitter @jdberr.
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