Yum Brands, the parent company of fast-food chains such as Pizza Hut, KFC, and Taco Bell, reported a mixed quarter with declining same-store sales for Pizza Hut and KFC. Yum CEO David Gibbs attributed this decline to the impacts of the Middle East conflict and a more cost-conscious consumer. However, there was some positive news as sales trends in the U.S. improved compared to the previous quarter, thanks to value meals like Pizza Hut’s $7 Deal Lovers.
In terms of financials, Yum reported second-quarter net income of $367 million, or $1.28 per share, a decrease from $418 million, or $1.46 per share, in the same period last year. Excluding items, the company earned $1.35 per share. Net sales saw a 4% rise to $1.76 billion, driven by new restaurant openings. However, same-store sales for Yum fell by 1% in the quarter, with both Pizza Hut and KFC reporting declines of 3%.
KFC’s U.S. restaurants continued to struggle, with domestic same-store sales shrinking by 5%. While KFC’s system sales in China, its largest market, picked up this quarter, its overall international same-store sales fell by 3%. On the other hand, Pizza Hut’s U.S. same-store sales decreased by 1%, and its international same-store sales declined by 4%.
Taco Bell, however, stood out as the crown jewel of Yum’s portfolio, with a 5% increase in same-store sales. This success can be attributed to Taco Bell’s strong presence in the U.S., where its reputation for value has helped it weather the pullback in consumer spending. Taco Bell’s same-store sales grew across all income groups, according to Gibbs.
Looking ahead, Yum announced plans to expand its rollout of artificial intelligence (AI) technology across Taco Bell drive-thru lanes in hundreds of its U.S. restaurants by the end of the year. The company believes that AI can enhance the customer experience and improve efficiency.
Despite these positive developments, Yum faces challenges due to temporary closures of approximately 200 restaurants across the Middle East, Malaysia, and Indonesia. Chief Financial Officer Chris Turner stated that some of these locations may reopen later this month, but there is a risk of permanent closure if the conflict worsens.
In conclusion, Yum Brands reported a mixed quarter with declining same-store sales for Pizza Hut and KFC. However, the company saw improved sales trends in the U.S. and strong performance from Taco Bell. Yum plans to leverage AI technology to enhance the customer experience, and the temporary closures of some restaurants due to the Middle East conflict pose potential risks.
