Yum Brands to Sell Pizza Hut for $2.7 Billion, Unloads Struggling Chain
The fast-food giant's first-quarter earnings per share excluding special items rose 15% to $1.50 as Taco Bell's same-store sales accelerated to 8%.
Yum! Brands (YUM) agreed to sell its Pizza Hut division for $2.7 billion, shedding a business whose U.S. sales have declined for at least four consecutive quarters and whose operating profit fell 14% in the first quarter of 2026. The fast-food company simultaneously authorized $4 billion in share buybacks, signaling a strategic pivot toward its faster-growing Taco Bell and KFC brands.
The deal, expected to close in the third quarter, splits Pizza Hut into two pieces: $1.5 billion for the business outside China, sold to LongRange Capital, and $1.2 billion for the China operations, sold to Yum China. Yum expects roughly $2.3 billion in net proceeds after taxes and adjustments, with about $85 million in one-time separation costs spread across the remainder of 2026. Once the transaction closes, Yum will no longer report Pizza Hut as a segment, fundamentally reshaping how investors evaluate the company's results.
The divestiture removes a persistent drag. Pizza Hut same-store sales were flat globally in the first quarter, an improvement from the prior three quarters of decline, but the U.S. business deteriorated further with a 4% drop. U.S. system sales fell 6% ex-foreign exchange, extending a streak of declines that has persisted for at least five quarters. Operating margin in the Pizza Hut division compressed to 25.4% from 32.3% a year earlier, a 6.9-percentage-point contraction. The company recorded $37 million in strategic-options review charges related to Pizza Hut in the quarter, bringing cumulative costs to $78 million.
Excluding Pizza Hut, the remaining portfolio showed meaningfully stronger momentum. System sales grew 7% ex-foreign exchange, unit count expanded 6%, and core operating profit rose 10%. Taco Bell led the charge, with same-store sales accelerating to 8% from 7% in the prior quarter and system sales ex-foreign exchange jumping 10%. Internationally, Taco Bell system sales surged 16% ex-foreign exchange. KFC's unit growth accelerated to 7%, with 648 new restaurants opened across 45 countries in the quarter, pushing the division's total count to 34,332.
KFC's same-store sales, however, decelerated to 2% from 3% in the prior quarter, dragged down by a 2% decline in the U.S.. KFC China system sales grew 5% ex-foreign exchange, slowing from 9% in the fourth quarter. Bright spots emerged in the Middle East, Turkey and North Africa, where KFC system sales surged 19% ex-foreign exchange, and in India, where they rose 16%.
Across the entire company, first-quarter revenue rose 15% to $2.06 billion, with company sales up 29% and franchise and property revenues up 9%. Earnings per share excluding special items climbed 15% to $1.50. GAAP earnings per share reached $1.55, up 72%, boosted by a $44 million net litigation settlement related to credit-card interchange fees. Core operating profit grew 6% to $612 million.
Digital sales approached $11 billion in the quarter, with a record 63% of system sales coming through digital channels, up from roughly 60% in the prior quarter. Habit Burger & Grill, the company's smaller brand, showed signs of recovery with system sales and same-store sales each growing 5%, reversing flat performance in the fourth quarter.
With the Pizza Hut sale, Yum is betting that a leaner portfolio centered on Taco Bell's domestic acceleration and KFC's international expansion can deliver stronger returns than the three-brand structure that defined it for decades. The $4 billion repurchase authorization underscores management's intent to return capital as the company's reporting structure resets.