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Key Takeaways
- Shares of KFC and Pizza Hut parent Yum! Brands rose Tuesday as the company gave an optimistic view of its value-centric brands like Taco Bell as consumers pull back on discretionary spending.
- Revenue rose year-over-year, but not quite as much as analysts expected. Same-store sales were lower at KFC and Pizza Hut, but higher at Taco Bell.
- An emphasis on value has emerged among other fast-food giants like McDonald’s in recent weeks amid efforts to win back consumers who turned away over high prices.
Yum! Brands (YUM) shares rose in intraday trading Tuesday despite second-quarter sales and net income falling slightly short of estimates, as executives said the company is encouraged by the performance of Taco Bell as consumers look to get value for their money.
The parent company of Taco Bell, Pizza Hut, and KFC reported higher revenue than the second quarter of 2023 at $1.76 billion, narrowly missing analysts’ estimates compiled by Visible Alpha. Net income also missed estimates at $367 million, but adjusted net income of $386 million came in above estimates after accounting for certain one-time costs.
Taco Bell Drives Sales Growth Amid Fast-Food Value Push
Same-store sales rose 5% year-over-year at Taco Bell. However, lower sales at KFC and Pizza Hut dragged same-store sales down 1% for the overall company, similar to its first-quarter performance.
Chief Executive Officer (CEO) David Gibbs said in Tuesday’s earnings call that the company feels good about Taco Bell’s performance because of the chain’s ability to be the “always-on-value brand” in a consumer environment “where the consumer is probably pulling back a little bit.”
Value has been a key focus among other fast-food heavyweights like McDonald’s (MCD) and Wendy’s (WEN) in recent months, as the companies have said many consumers, especially in lower income brackets, have cut their discretionary spending over the last year. Gibbs said the company is “well-positioned to navigate these consumer headwinds” as brands like Taco Bell and KFC have “reputations for value no matter the environment.”
Shares of Yum! Brands rose 3.6% to $138.05 as of 2:10 p.m. ET Tuesday, adding to a winning stretch that has seen the stock rise 10% over the last two weeks.