Yum! Brands Inc.’s (YUM.N) latest quarterly sales climbed more than expected, propelled by strength at Taco Bell and KFC, its strongest divisions. Even laggard Pizza Hut showed some new signs of life.

Comparable sales at Yum rose 5 per cent last quarter, up from 1 per cent in the year-ago period. That topped the 3.1 per cent average estimate from Consensus Metrix. Taco Bell stood out in the mix with a 7 per cent gain, nearly double the 3.8 per cent projection.

Key Insights

- The report marks good news for the restaurant industry after both Starbucks Corp. (SBUX.O) and McDonald’s Corp. (MCD.N) recently reported their fastest growth in years. Yum’s results show the biggest players are overcoming higher labor and food costs to lure in more diners.

- Taco Bell is luring customers with discounts and delivery through GrubHub Inc., which Yum bought a stake in last year. But Taco Bell’s not alone: rival Chipotle Mexican Grill Inc. and others are also pushing hard on convenience and speedy deliveries.

- While Pizza Hut sales are improving, the pace is slow. Sales there rose 2 per cent in the quarter, the best level in several years. The recent success of delivery pioneer Domino’s Pizza Inc. may be complicating the chain’s recovery.

- Restaurants across the globe are facing pressure from rising costs, with labor and protein inflation at the forefront. McDonald’s and others have responded by raising menu prices. Yum didn’t specifically mention those costs in its earnings release, so investors will be listening for more details on the call today.

Market Reaction

- Shares were up 4.2 per cent in premarket trading in New York.