Yum Brands, the parent company of popular fast-food chains including KFC and Taco Bell, revealed its second-quarter sales results that fell below analysts' expectations on Tuesday, as consumer behavior shifts towards more cost-conscious choices. The company reported a revenue increase to $1.76 billion for the quarter ending June 30, a rise from $1.69 billion the previous year.
However, this result did not meet the average analyst estimate of $1.8 billion according to Capital IQ. Furthermore, same-store sales observed a slight dip, declining by 1%, contrasting with the consensus that projected them to remain flat. Adjusted earnings per share also experienced a decline, dropping to $1.35 from $1.41 year-on-year, albeit outpacing the market's expectations which anticipated earnings of $1.33.
Following the earnings announcement, Yum Brands’ shares saw an uptick of 4.1% during midday trading. In his statement, CEO David Gibbs expressed satisfaction with the company’s resilience during what has been a challenging operating environment, highlighting a 10% increase in core operating profit.
He noted the robust performance of Taco Bell in the United States and KFC internationally, which together contributed to a 5% growth in system sales driven by an impressive 8% growth in units. Despite this positive note, Gibbs acknowledged the significant volatility that persists in various markets, stating that sales in some regions are not meeting company expectations.
During a conference call with analysts, Gibbs remarked on the need for continued vigilance, citing impacts from conflicts in the Middle East as well as broader economic pressures that have resulted in consumers being more discerning about their spending. The breakdown by brand revealed that while same-store sales for KFC and Pizza Hut declined by 3%, Taco Bell outperformed with an increase of 5%.
Overall, company sales surged by 12% to reach $572 million, with revenue from franchise and property operations rising slightly from $785 million to $789 million. As a reflection of confidence in future growth, Gibbs reiterated the company’s commitment to achieving at least 8% growth in core operating profit in 2024, positioning them well for sustained robust expansion into 2025.
The evolving consumer landscape presents challenges, yet Yum Brands aims to navigate these with strategic optimism as they continue to adapt and drive profitability amidst changing market dynamics..