Yum! Brands’s sales rose in the first quarter, fueled by strong sales at Taco Bell and KFC, though partially offset by weakness in its Pizza Hut brand. The company remains optimistic about international sales despite trade challenges.
KFC’s sales gains were driven mainly by new units, while higher same-store sales were the primary driver of Taco Bell’s sales. Pizza Hut’s sales decline was driven by a decrease in same-store sales and a lower unit count.
Earnings per share (EPS), excluding special items, came in at $1.30, up from $1.10 a year earlier and above analysts’ estimates.
CEO David Gibbs commended the company’s ability to stay nimble and deliver industry-leading results in a complex consumer environment, highlighting the strength and resilience of the company’s business model.
“As I embark on my final year as CEO, I’m confident that Yum!’s world-class franchisees, talent, global scale, proprietary technologies, and bold growth strategies will continue to position the company for long-term success,” he said in a statement.
U.S. fast-food franchise giants have faced several challenges this year, one of which is a slowdown in domestic consumer spending. Shoppers are growing anxious about headlines of impending stagflation—rising prices and a slowing economy. This has intensified competition among franchises targeting price-sensitive low- and middle-income consumers.
However, Yum! Brands has addressed this challenge and implemented several productivity initiatives.
“As a result, restaurant-level margins reached 10 percent in 2024, a 150 basis points higher year over year.”
A third challenge is supply-chain friction arising from growing trade disputes, including disputes between the United States and China, Yum! Brands’s largest overseas market.
However, the company doesn’t see any material impact from this challenge.
“International has been a complex environment for us in the last year,” said CFO Chris Turner. “But the good news is things are improving, and we feel a lot of confidence going into 2025.”
Meanwhile, the company gave upbeat guidance regarding international sales despite the ongoing trade challenges.
“If you backed out of China, our sales internationally were up 5 percent on same-store sales. So that growth is quite widespread. If you look at the table in our earnings release, you can see that system sales were up in all 10 markets we measured,” he said.
“So, we’re putting the issues from the Middle East behind us, and most of the world, and we feel good about the recovery there. And we have not seen, and we are monitoring this and any other kind of consumer change behavior.”
Gibbs said his team is “doing an amazing job navigating this environment.”
“They’re leaning in a little bit more on value,” he said. “The Canadian market was up strongly this quarter, leaning in on the $5 price point. Korea did a buy one get one free.”
