December 11, 2023

Cars wait in line at a Kentucky Fried Chicken drive-thru in Bloomsburg.

Paul Weaver | Light Rocket | Getty Images

yum brand Wednesday Report Quarterly earnings missed analysts’ expectations despite a rebound in sales at KFC and Pizza Hut in China.

Yum joins a growing list of companies including Procter and Starbucks Reports say sales in China are recovering.

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Shares of the company were down more than 2% in early trading.

Here’s how the company’s first-quarter report compares to Wall Street expectations, according to a Refinitiv survey of analysts:

  • Earnings per share: $1.06 adjusted vs. $1.13 expected
  • Revenue: $1.65 billion vs. $1.62 billion expected

Yum! reported net income of $300 million, or $1.05 a share, down from $399 million, or $1.36 a share, a year earlier. Earnings per share fell 7 cents due to a drop in the value of unnamed investments and 8 cents per share due to foreign exchange effects, the company said.

Excluding items, the restaurant company earned $1.06 per share.

net sales It rose 6 percent to $1.65 billion. Its same-store sales rose 8% in the quarter as its three major chains outperformed expectations. Digital sales accounted for more than 45% of transactions, CEO David Gibbs said in the company’s earnings report.

Executives credit lower-income consumers for helping drive sales in the quarter. Deals like Taco Bell’s $2 and value menus, KFC’s $2 for $5 wraps and Pizza Hut’s $6.99 melts helped attract diners who would otherwise spend less at restaurants.

U.S. inflation, staffing challenges and supply chain disruptions have eased, making it easier for the company and its franchisees to operate restaurants, Yum CFO Chris Turner said on a conference call with analysts. However, some international markets are still struggling with inflation, he added.

KFC’s same-store sales rose 9%, thanks to international markets. In China, KFC’s largest market, system sales rose 17 percent, helping lift the chain’s international same-store sales growth of 11 percent.

Likewise, Pizza Hut reported that system sales in China jumped 24% during the quarter.China is Pizza Hut’s second-biggest market after the U.S.

The pizza chain also did well in the U.S., reporting an 8% increase in domestic same-store sales. Overall, Pizza Hut’s same-store sales rose 7%.

Taco Bell reported same-store sales growth of 8% for the quarter. Among Yum!’s portfolio, Taco Bell saw the largest increase in openings as the chain focused on expanding its international footprint.

China became the fourth international market for Taco Bell to have at least 100 stores. Spain, the UK and India have already crossed this threshold.

During the quarter, Yum! opened 746 new stores across its chain.

Shortly after the quarter ended, Yum! completed its exit from Russia by selling those KFC restaurants to existing Russian franchisee Smart Service. The company already sold its local Pizza Hut locations to a local operator after Moscow invaded Ukraine last summer.

Yum won’t face any comparisons next quarter, including its Russian operations, since it suspended operations there in early March last year.