TACO Bell parent Yum Brands reported a bigger-than-expected fall on Tuesday (Aug 6) in same-store sales for the second quarter as sticky inflation prompted lower-income Americans to eat out less and cook more affordable meals at home.
Like its peers in the fast-food industry, Yum has been investing in loyalty programs and refreshing its menus in an attempt to appeal to budget-conscious consumers, but stiff competition for value meals and promotions has dogged its KFC business in the US this year.
Same-store sales at the US KFC division fell 5 per cent, compared with a 7 per cent decline in the prior quarter.
Yum’s sales weakness this quarter echoes results from other restaurant majors such as Domino’s, McDonald’s and Starbucks.
Still, fresh menu items such as the Cantina Chicken and the popular Taco Tuesday promotional event helped drive growth in comparable sales at Yum’s key Taco Bell division to 5 per cent, ahead of expectations of 3.6 per cent, according to LSEG data.
This helped Yum narrow its quarterly overall same-store sales decline to 1 per cent, from 3 per cent in the preceding quarter. However, that was wider than market expectations for a decline of 0.2 per cent.
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The company is also investing in improving service times and the digital experience at its stores and drive-thrus with the addition of kiosks and artificial intelligence-based technologies.
Excluding items, Yum Brands reported a profit of US$1.35 per share for the quarter ended Jun 30, edging past estimates of US$1.33.
“I’m incredibly pleased with how well our teams have managed through a challenging operating environment to deliver a 10 per cent increase in core operating profit,” said CEO David Gibbs.
Shares of Yum Brands were marginally higher in premarket trading.
The company also reaffirmed its full-year core profit growth expectations of 8 per cent. REUTERS
