Yum Brands recently reported a mixed quarter with both Pizza Hut and KFC experiencing declining same-store sales. The company’s CEO, David Gibbs, attributed this to the impacts of the Middle East conflict and a more cost-conscious consumer base.
Yum Brands reported second-quarter earnings per share of $1.35 adjusted, slightly beating analysts’ expectations of $1.33. However, the company’s revenue fell short of Wall Street estimates, coming in at $1.76 billion compared to $1.8 billion expected.
Yum’s same-store sales declined by 1% in the quarter, with both Pizza Hut and KFC reporting declines of 3%. KFC’s U.S. restaurants struggled significantly, with domestic same-store sales shrinking by 5%. Meanwhile, Pizza Hut’s same-store sales decreased by 1% in the U.S. and 4% internationally.
Success of Taco Bell
Despite the challenges faced by Pizza Hut and KFC, Taco Bell saw a 5% increase in same-store sales in the quarter. The chain’s focus on value offerings has helped it maintain strong sales, especially in the U.S. market. Taco Bell’s same-store sales grew across all income cohorts, demonstrating its broad appeal.
Future Plans
Yum Brands announced plans to expand the use of artificial intelligence in Taco Bell drive-thru lanes at hundreds of its U.S. restaurants by the end of the year. This move aims to improve customer service and drive sales growth.
Challenges Ahead
Yum Brands faces ongoing challenges, with roughly 200 of its restaurants temporarily closed in the Middle East, Malaysia, and Indonesia. Chief Financial Officer Chris Turner noted the risk of permanent closures if the conflict in the region intensifies.
Yum Brands is navigating a challenging environment with declining sales at Pizza Hut and KFC. The company’s focus on value offerings and innovative initiatives like artificial intelligence at Taco Bell are crucial for driving future growth. However, the risk of permanent closures in conflict-affected regions poses a significant threat to Yum Brands’ overall performance.