A pedestrian walks past the American fast food chain Taco Bell in Spain.
Xavier Lopez | Light flare | Getty Images
Yum Brands Wednesday reported quarterly earnings and revenue that beat analysts’ expectations, fueled by strong same-store sales growth at Taco Bell.
Overall, the restaurant giant saw strong demand in the United States, with high-income consumers turning to fast food and low-income diners buying its chains’ value meals. However, weak sales in China again weighed on KFC and Pizza Hut results, after the Chinese government relaxed its zero Covid policy and a wave of new outbreaks hit the country. The resurgence has hurt the recovery efforts of Yum and other restaurant businesses, such as Starbucks.
investment related news
Here’s what Yum reported compared to what Wall Street expected, based on a Refinitiv analyst survey:
- Earnings per share: $1.31 adjusted vs $1.26 forecast
- Income: $2.02 billion vs $1.92 billion expected
Yum reported fourth-quarter net income of $371 million, or $1.29 per share, compared with $330 million, or $1.11 per share, a year earlier. Excluding expenses related to its decision to leave Russia and other items, the company earned 1.31 cents per share.
Net sales grew 7% to $2.02 billion and the company’s worldwide same-store sales increased 6%, driven by diners’ strong appetite for Taco Bell.
Taco Bell, which is typically the best performer in Yum’s portfolio, posted same-store sales growth of 11%, beating StreetAccount estimates of 6.7%. The chain attracted customers with a mix of higher priced menu items and value offerings.
“We connect and win through value,” Yum CEO David Gibbs said on the company’s conference call.
Executives said Taco Bell sold 45 million Mexican pizzas in 2022, a number made even more impressive by the fact that it was only available for four months of the year.
Most of the Mexican-inspired chain’s locations are in the United States, though it has expanded internationally in recent years. Gibbs said Taco Bell’s international footprint exceeded 1,000 locations during the quarter. The company has built 40% of its international restaurants in the past two years.
KFC fell short of Wall Street expectations as China’s weak performance weighed on its results. The fried chicken chain reported same-store sales growth of 5%, just below estimates of 5.4%. Excluding China, its largest market, KFC’s same-store sales rose 9%.
Weak sales in China also hurt Pizza Hut’s performance in the fourth quarter. The pizza chain’s global same-store sales rose 1%, but its international same-store sales fell 1%. U.S. Pizza Hut same-store sales rose 4%, a sign that consumers have recovered from last year’s pizza fatigue after ordering too many pies during Covid shutdowns. Executives credited the ad with highlighting new value offerings, helping attract low-income customers to the pizza chain.
Habit Burger Grill, Yum’s newest addition, said sales at establishments open for at least a year fell 1% in the quarter. However, sales of its system, which tracks transactions at all of the chain’s restaurants rather than just establishments open for 12 months, soared 12%, thanks to Yum’s rapid expansion of the chain.
