Yum Brands, the fast-food giant behind KFC, Taco Bell, Pizza Hut, and Habit Burger, reported a surprising drop in worldwide same-store sales on Tuesday. While its KFC brand faced significant headwinds in the U.S. and international markets, Taco Bell remained a strong performer, highlighting contrasting trends across Yum’s portfolio.
KFC Struggles Domestically Despite Value Offerings
KFC, Yum’s flagship fried chicken chain, saw U.S. same-store sales fall by 7%, marking the third consecutive quarter of declines. This dip came despite Yum’s recent launch of $5 value deals under the “Taste of KFC” menu, featuring new items like an eight-piece chicken nuggets pack and a chicken nugget meal bowl. The company is actively responding to intensifying “value wars” in the U.S. fast-food market, driven by competitors like McDonald’s and Burger King.
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Industry-wide, consumers are increasingly budget-conscious and seeking affordable options amid high menu prices, affecting KFC’s appeal to value-focused diners. In response, Yum is trying to balance these new value deals with maintaining profit margins.
Impact of Geopolitical Tensions
Yum Brands’ international sales were hit by boycotts in several markets in response to Israel’s conflict with Gaza. The geopolitical tensions affected KFC sales in countries like Malaysia, Indonesia, and other Middle Eastern markets. Yum executives had previously acknowledged these impacts, but the extent was underscored by Yum’s 2% decline in worldwide comparable sales, missing the market expectation of a slight rise of 0.23%.
In contrast, Taco Bell remained a bright spot for Yum, recording a 4% rise in U.S. same-store sales — its 11th straight quarter of growth. This strength helped offset declines elsewhere, and Taco Bell continues to be a steady performer for the company’s U.S. market.
Mixed Earnings and Forward-Looking Expectations
Yum’s adjusted earnings per share of $1.37 fell short of Wall Street expectations of $1.41, and its revenue of $1.826 billion also missed the analyst consensus of $1.899 billion. The company’s stock reacted mildly, dipping about 1% in premarket trading. However, Yum’s unit expansion remained robust, with a 5% increase in unit count and over 1,000 new restaurants added across all brands.
Digital sales continued to be a highlight, surpassing $8 billion in the quarter and accounting for over half of the company’s total sales, underscoring Yum’s growing focus on digital transformation.
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Yum CEO David Gibbs expressed confidence in the resilience of the company’s brands. “While sales have been impacted by pressures relating to geopolitical conflicts and challenged consumer sentiment, our iconic brands which are led by our world-class talent and enabled by Yum!’s unmatched scale and cutting-edge, proprietary tech, are positioned for unstoppable growth,” Gibbs stated.