YUM Brands missed Wall Street estimates for quarterly sales on Wednesday (Feb 7), with weaker growth for all three of its top chains, as fewer customers ordered at Taco Bell, KFC and Pizza Hut amid a choppy spending environment in the US.
Shares of the company fell about 2 per cent in premarket trading.
With their budgets stretched, Americans – particularly low-income households that frequent fast-food chains like KFC and McDonald’s – have been increasingly cutting costs, including by switching to home-cooked meals as grocery prices moderate at a faster pace than restaurant food.
Fast-food traffic worsened in the fourth quarter, with KFC and Pizza Hut seeing declines of 4.8 per cent and 2.6 per cent, respectively, according to Placer.ai data.
Taco Bell, long viewed as the “crown jewel” of Yum’s portfolio, also saw a 3.5 per cent drop, the data showed. UBS analysts had noted that the Mexican-themed chain saw customers trade down to cheaper menu items in the quarter.
Several Western restaurant brands, including McDonald’s and Yum, are also seeing a hit to business in the Middle East and a few other markets like Malaysia and Indonesia due to the Israel-Hamas war.
The Middle East, Turkey and North African markets together make up about 6 per cent of KFC’s system-wide sales, while Middle East and Africa account for 5 per cent of those at Pizza Hut.
Yum, which franchises operations of its chains in the Middle East, did not disclose a financial impact from the war.
Operating margins rose across brands in the quarter thanks to easing commodity costs, but Yum still missed profit expectations due to fluctuations in its tax rate.
Global same-store sales at Taco Bell rose 3 per cent, while analysts were expecting a 3.7 per cent rise, and Pizza Hut posted a 2 per cent decline, against expectations for a 1.2 per cent rise, according to LSEG data. KFC also missed expectations.
Total same-store sales at Yum Brands rose 1 per cent in the fourth quarter ended Dec 31, missing estimates for a 3.9 per cent increase. REUTERS
