Yum Brands, the parent company of Pizza Hut and KFC, recently reported a mixed quarter as both of these brands experienced declining same-store sales. The CEO, David Gibbs, attributed these challenges to the impacts of the Middle East conflict and a more cost-conscious consumer base. This has created headwinds for same-store sales at both Pizza Hut and KFC.
Yum Brands reported earnings per share of $1.35 adjusted, slightly higher than the expected $1.33. However, revenue came in below expectations at $1.76 billion compared to the anticipated $1.8 billion. The company’s second-quarter net income of $367 million was a decrease from the previous year, with earnings per share at $1.28. Net sales saw a 4% increase to $1.76 billion, mainly driven by new restaurant openings.
KFC’s same-store sales fell 1% in the quarter, with both domestic and international locations experiencing declines. The U.S. restaurants struggled with a 5% decrease in same-store sales, while international same-store sales were down by 3%. Although KFC saw an increase in system sales in China, its largest market, overall international same-store sales continued to decline.
Pizza Hut also faced challenges with declining same-store sales, both in the U.S. and internationally. U.S. same-store sales decreased by 1%, while international locations experienced a larger decline of 4%. Despite these challenges, Yum Brands saw success with Taco Bell, which had a 5% increase in same-store sales during the quarter.
In an effort to adapt to changing consumer preferences and improve efficiency, Yum Brands announced plans to expand the rollout of artificial intelligence across Taco Bell drive-thru lanes in hundreds of U.S. restaurants by the end of the year. This move aims to enhance the customer experience and streamline operations.
Yum Brands also highlighted the impact of roughly 200 temporarily closed restaurants across the Middle East, Malaysia, and Indonesia. Chief Financial Officer Chris Turner acknowledged the risk of permanent closures if the conflict escalates further. Some locations may reopen as early as later this month, but the uncertainty presents challenges for the company.
Yum Brands faced several challenges in the second quarter, particularly with declining same-store sales at Pizza Hut and KFC. While the company saw some success with Taco Bell and technological innovations like artificial intelligence, the impact of the ongoing conflict and changing consumer behavior continue to pose challenges for the future.
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