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Yum Brands on Tuesday reported quarterly earnings and revenue that missed Wall Street’s expectation as same-store sales at KFC and Pizza Hut slid more than expected.
“The complex consumer environment that exists in many markets around the globe has contributed to pronounced regional sales variations, which has caused our system-sales growth to fall short of our long-term algorithm this year,” CEO David Gibbs said on the company’s conference call.
In 2022, Yum raised its long-term target to 5% unit growth, 7% system-sales growth and 8% operating profit growth.
Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by LSEG:
- Earnings per share: $1.37 adjusted vs. $1.41 expected
- Revenue: $1.83 billion vs. $1.90 billion expected
Yum reported third-quarter net income of $382 million, or $1.35 per share, down from $416 million, or $1.46 per share, a year earlier.
Excluding items, the company earned $1.37 per share.
Net sales rose 7% to $1.83 billion.
Yum’s worldwide same-store sales fell 2% in the quarter, dragged down by weaker performances at KFC and Pizza Hut, which both reported same-store sales declines of 4%.
The company’s sales have been hurt by pressures related to “geopolitical conflicts and challenged consumer sentiment,” Gibbs said in a statement.
Conflict in the Middle East has weighed on Yum’s results since the fourth quarter of last year. KFC’s same-store sales have tumbled as much as 45% over that period in the Middle East, Indonesia and Malaysia, for example.
KFC’s U.S. same-store sales slid 5% this quarter. The market is KFC’s second largest, trailing only China, but the chain has ceded market share to Popeyes in recent years. Last year, Popeyes overtook KFC as the No. 2 chicken chain in the U.S.
Executives said Tuesday that KFC will focus on value in the fourth quarter.
Pizza Hut, on the other hand, had a steeper decline in its international markets. The pizza chain saw its international same-store sales shrink 6%, while U.S. same-store sales fell just 1%. Pizza Hut has shifted to offering more discounts in China, India and some Middle Eastern countries, according to Gibbs.
Taco Bell, the gem of Yum’s portfolio, reported same-store sales growth of 4%. The launch of the Cheesy Street Chalupas, the return of the Big Cheez-It and the rollout of a $7 value meal boosted Taco Bell’s sales during the quarter.
Gibbs said Taco Bell led the industry in the third quarter in value perception among all fast-food consumers, helping its sales even during an industrywide slowdown.
Correction: This story has been updated to correct a quote from Yum CEO David Gibbs.