17 Aug 2020
Posted in Business Fundamentals
Sentimental recovery in food services sector driven by Del Taco and Yum! Brands benefitted by quick implementation of digital infrastructure, says GlobalData
In July 2020, ten of the top 11 global foodservice companies witnessed a recovery in their earnings transcript sentiment score. Sentiment growth in the sector was largely driven by Del Taco Restaurants, which saw over 30% in July 2020*, compared to Q1 2020, according to GlobalData, a leading data, and analytics company.
Rinaldo Pereira, Senior Analyst at GlobalData, comments: “Del Taco’s focus on drive-through, deliveries and cost-saving measures helped the company to weather the impact of the COVID-19 pandemic. The company’s app’s userbase was up by over 25% by the end of June 2020, compared to 2019, and it was able to limit margin contraction, despite minimum wage issues in California that affected over 90% of restaurants in California and Las Vegas). Moreover, comments on improving the debt ratio also positively influenced sentimental growth.”
Yum! Brands and Yum China Holdings, the companies that own KFC and Pizza Hut, witnessed sentiment growth by over 18% and 26%, respectively. Yum! Brands saw digital sales growth of around 40% compared to Q2 2019 due to its swift response to the demand for contactless services and deliveries. Due to a decline in operating expenses, net income grew by over 100% compared to Q1 2020.
Pereira continued: “Prolonged social distancing measures affected dine-in customer demands as drive-through and contactless deliveries were no longer optional. Restaurants were forced to develop digital ordering infrastructure quickly.”
As identified by GlobalData’s Filing Analytics tool, there was a rise in the number of mentions of ‘digital’ in Q4 2019. This dropped off again by Q1 2020, coinciding with when countries worldwide were experiencing shutdowns, but the trend is now returning as cases drop off following the first wave of cases. ‘Digital’ and ‘Delivery’ were among the top keyword mentions in foodservice company earnings transcripts during July 2020.
Chipotle Mexican Grill had the most mentions of both ‘Digital’ and ‘Delivery’ in July 2020.
Pereira added: “Chipotle’s exceptional digital segment performance drove a sentiment upswing. It’s delivery partnerships (Uber Eats and GrubHub) and digital investments have paid off, and its comparable sales rebound in June positively influenced sentiments.”
McDonald’s Corp also saw sentiments grow, despite reporting quarterly losses.
Pereira continues: “Comments on store re-openings and increased financial stability via a US$6.5bn package positively influenced sentiments. According to the Chicago-based company, despite shuttered stores hampering sales, the rapid rise in drive-throughs is expected to fuel a recovery. Japan was also a silver lining for the company due to same-store sales growth in the country.
“Several marquee brands have opened up most stores with limited seating capabilities. However, fears of a second wave of COVID-19 will make it necessary for companies to enhance focus on drive-through and delivery specific menus.”
* Based on the fiscal Q2 2020 earnings transcript