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Parent of Taco Bell, KFC Sticks To Growth Plans in Face of Global Headwinds

Photo Courtesy of JHVEPHOTO.

Yum Brands sales rose but earnings dropped with its opening of 781 locations worldwide in the second quarter as the operator of Taco Bell, KFC and Pizza Hut sticks to its goal expanding global eateries by 4% to 5% annually.

Executives of the Louisville, Kentucky-based company, among the world’s largest restaurant operators with 53,000 locations in 155 countries, told analysts Wednesday it posted revenue growth of 2% in the quarter ended June 30 as profits declined with costs rising globally and other issues lingering outside the United States.

The company said growth plans remain on track despite facing continued pandemic lockdowns in China and the closing of more than 1,100 Russia locations of Pizza Hut and KFC during the quarter. Yum Brands is nearing full divestment of company-owned KFC locations in that country. Dozens of companies worldwide have pulled operations from Russia in response to its February attack on Ukraine.

Sales growth also came with signs of U.S. consumers pulling back on all types of restaurant spending as they deal with historically high costs for gas, groceries and other necessities.

“We are leaning more in on value offerings all around the world and that also is playing out in the United States,” Yum Brands CEO David Gibbs told analysts during a conference call. “If you look at the U.S., I think what’s happened over the last quarter is the low-income consumer pulling back has become more pronounced. We’ve seen that in our business and we’re reacting accordingly.”

The company plans to continue testing and installing drive-thru and other technologies geared to serving digital ordering, which now makes up nearly 40% of Yum’s global sales. Digital sales by the company and its franchisees reached $6 billion in the latest quarter.

Approximately two-thirds of the company’s Habit Burger Grill stores are now equipped with pickup shelves for carryout orders, and the shelves are now fully deployed across company-owned Taco Bell stores in the U.S.

Chief Financial Officer Chris Turner said the company plans to roll out pickup shelves across the rest of its global Taco Bell franchise system by early 2023.

The adjustments come as Yum Brands and competitors face a slowdown in what has been a significant restaurant rebound during the past year, when pent-up demand created by the pandemic spurred a mass return to dining outside the home.

A July 26 report from restaurant analytics firm Black Box Intelligence noted the industry’s comparable-store sales for June were up 1.6% from a year earlier in the U.S., even though customer traffic declined 4.8%. Fast-food and other limited-service chains are generally faring better than full-service chains in maintaining their momentum of the past year, though all types of restaurants face rising food, labor and other costs.

“Restaurants are experiencing strong headwinds as the industry hits peak summer season,” the Black Box report said. “In response to inflation hitting a new 40-year high in June, consumers are, predictably, watching their wallets with extra scrutiny as gas, groceries, rent, restaurant prices and more continue to rise.”

Yum Brands reported total second-quarter revenue of $1.64 billion, up 2% from the year-earlier period. Net income was $224 million, down 43% from the year-earlier quarter.



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