Taco Bell Naked Chicken Chalupas, lower taxes boost Yum's profit

(Reuters) - Yum Brands Inc (NYSE: YUM) posted a better-than-expected quarterly profit, helped by lower taxes, vigorous sales of Taco Bell's Naked Chicken Chalupas and lower costs at KFC restaurants.

Shares of the company were up 2.7 percent at $68.13 in midday trading on Wednesday.

Sales rose 8 percent at Taco Bell restaurants open for more than a year, topping the 3.7 percent growth expected by analysts polled by research firm Consensus Metrix.

That sales figure at the company's "cult brand" was boosted by $1 Double Stacked Tacos, the return of the Triple Double Crunchwrap and the sale of more than 25 million Naked Chicken Chalupas, which are tacos in a fried chicken shell.

Taco Bell traffic rose 5 percent during the first quarter, bucking a stubborn restaurant industry slump that is nagging major brands including McDonald's Corp (NYSE: MCD).

Yum Brands Chief Executive Officer Greg Creed promised to sell more Naked products, saying "we'd be crazy not to," with soon-to-be launched Naked Chicken Chips that will be served with nacho cheese dipping sauce.

KFC's same-store sales growth of 2 percent missed analysts' estimates, while its operating profit jumped 12 percent on lower costs resulting from restaurant sales to franchisees.

The fried chicken chain, which contributes almost half of Yum's operating profit, recently debuted actor Rob Lowe as its new Colonel Sanders mascot. It is also catching up with rivals by switching to chicken raised without medically important antibiotics.

Pizza Hut continued to struggle, reporting a 3 percent drop in same-store sales, its third straight quarterly decline, even as rival Domino's Pizza Inc (NYSE: DPZ) last week reported domestic growth of 10.2 percent.

Yum and Pizza Hut franchisees this month struck a deal that includes $130 million in corporate marketing and technology investments.

Yum Brands' income from continuing operations rose 24 percent to $280 million, or 77 cents per share, for the latest quarter.

Excluding items, the company earned 65 cents per share, beating the average analyst estimate of 60 cents, according to Thomson Reuters I/B/E/S.

Yum adopted new accounting standards that lowered taxes during the quarter, when its effective tax rate was 19.4 percent and its effective tax rate excluding special items was 12.5 percent.

The company's 2016 effective tax rate was 24.6 percent. It was 26.3 percent excluding special items, according to regulatory filings.

Total revenue fell 1.8 percent to $1.42 billion as it sold more restaurants to franchisees but managed to beat Wall Street's target of $1.35 billion.

(Reporting by Sruthi Ramakrishnan in Bengaluru and Lisa Baertlein in Los Angeles; Editing by Saumyadeb Chakrabarty, Bernard Orr)

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