Yum Brands earnings miss estimates as Pizza Hut, KFC sales disappoint
- Yum Brands' quarterly earnings and revenue missed Wall Street's estimates.
- KFC and Pizza Hut reported same-store sales declines, while Taco Bell's same-store sales rose just 1%.
- Yum said its digital sales accounted for more than 50% of sales for the first time.
Yum Brands on Wednesday reported quarterly earnings and revenue that missed analysts' expectations as Pizza Hut and KFC struggled to attract customers.
Shares of the company fell nearly 4% in early trading.
Here's what the company reported compared with what Wall Street was expecting, based on a survey of analysts by LSEG:
- Earnings per share: $1.15 adjusted vs. $1.20 expected
- Revenue: $1.6 billion vs. $1.71 billion expected
Yum reported first-quarter net income of $314 million, or $1.10 per share, up from $300 million, or $1.05 per share, a year earlier.
Excluding investment losses and other items, the company earned $1.15 per share.
Net sales dropped 3% to $1.6 billion. Yum's global same-store sales also fell 3% in the quarter, missing StreetAccount estimates of 0.2% same-store sales growth.
Across Yum's three largest brands, only Taco Bell reported same-store sales growth. The metric rose 1% during the quarter at the Mexican-inspired chain. Taco Bell's U.S. locations reported same-store sales growth of 2%, while its international business posted a decline of 2%. Executives said the chain had a stronger start to the second quarter.
KFC's same-store sales fell 2% in the quarter. The bigger decline came in the U.S., where they shrank 7%. However, the chicken chain's international division saw same-store sales decrease just 2%, thanks to growth in China, its largest market. A year ago, KFC's quarterly same-store sales rose 9%.
Pizza Hut reported same-store sales dropped 7%, as demand lagged both in its home market and internationally. The pizza chain's U.S. restaurants reported a decrease of 6%, while its international division posted an 8% decline. The chain faced tough comparisons to the year-ago period, when Pizza Hut reported 7% same-store sales growth, fueled by its new Melts.
Broadly, Yum's international business struggled, which the company blamed partially on its Middle Eastern restaurants. It is unclear if the hit has come from boycotts related to the war in Gaza that have affected other chains or from other disruptions.
"While the impacts from the Middle East conflict have been scattered and difficult to measure, we've begun to see improvement in the most impacted markets," Yum CEO David Gibbs told analysts on the company's conference call.
Yum's digital business was one of the few bright spots this quarter. The company said its digital sales accounted for more than 50% of sales for the first time.
In the second quarter, Yum plans to expand its pilot of artificial intelligence that takes drive-thru orders. The original test occurred at five Taco Bell locations in California; soon, 35 restaurants will try out the technology.
Yum's global footprint grew 6% in the quarter, thanks to 808 new restaurant openings.