Yum Brands, the parent company of popular fast-food chains Pizza Hut, KFC, and Taco Bell, recently reported quarterly earnings that fell short of expectations. The underperformance of Pizza Hut and KFC in attracting customers led to a decrease in revenue, causing shares of the company to fall nearly 4% in early trading.
Yum Brands reported earnings per share of $1.15 adjusted, compared to the expected $1.20. Net sales also dropped by 3% to $1.6 billion, missing the expected $1.71 billion. The company’s global same-store sales fell by 3% in the quarter, failing to meet estimates of 0.2% growth.
Among Yum’s three largest brands, only Taco Bell reported same-store sales growth, with a 1% increase during the quarter. Taco Bell’s U.S. locations experienced a 2% growth in same-store sales, while its international business saw a decline of 2%. KFC’s same-store sales fell by 2%, with a significant decline of 7% in the U.S. market. However, its international division only experienced a 2% decrease in same-store sales, largely due to growth in China. Pizza Hut reported a 7% drop in same-store sales, both domestically and internationally.
Yum Brands attributed its international business struggles partly to its Middle Eastern restaurants, although it is unclear whether this is due to the war in Gaza or other disruptions. Yum CEO David Gibbs mentioned that there has been some improvement in the affected markets.
Despite the overall underperformance, Yum’s digital business showed promise. The company revealed that its digital sales accounted for more than 50% of sales for the first time. In the upcoming quarter, Yum plans to expand its pilot of artificial intelligence for drive-thru orders, following a successful test at five Taco Bell locations in California.
On a positive note, Yum Brands experienced a 6% growth in its global footprint during the quarter, thanks to the opening of 808 new restaurants.
Overall, Yum Brands’ earnings fell short of expectations due to underperforming sales at Pizza Hut and KFC. While Taco Bell showed some growth, the company’s international business struggled, partially due to challenges in the Middle East. However, Yum’s digital business and plans for AI implementation in drive-thru orders offer potential for future success. Investors will be closely watching how the company addresses its sales challenges and capitalizes on its digital initiatives moving forward.
