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KFC-parent Yum Brands misses sales estimates amid cautious consumer spending

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LA Post: KFC-parent Yum Brands misses sales estimates amid cautious consumer spending
Reuters
Reuters
February 07, 2024

(Reuters) - Yum Brands missed Wall Street estimates for quarterly sales on Wednesday, with all three of its top chains seeing weaker growth, as fewer customers ordered at Taco Bell, KFC and Pizza Hut amid a choppy spending environment in the United States.

With their budgets stretched, Americans — particularly low-income households that frequent fast-food chains like KFC and McDonald's — have been increasingly cutting costs, including by switching to home-cooked meals as grocery prices moderate at a faster pace than restaurant food.

Fast-food traffic worsened in the fourth quarter, with KFC and Pizza Hut seeing declines of 4.8% and 2.6%, respectively, according to Placer.ai data.

Taco Bell, which was long viewed as the "crown jewel" of Yum's portfolio, also saw a 3.5% drop, the data showed. UBS analysts had noted that the Mexican-themed chain saw customers trade down to cheaper menu items in the quarter.

Several Western restaurant brands, including McDonald's and Yum, are also seeing a hit to business in the Middle East and a few other markets like Malaysia and Indonesia due to the Israel-Hamas war.

The Middle East, Turkey and North African markets together make up about 6% of KFC's system-wide sales, while Middle East and Africa account for 5% of those at Pizza Hut.

Yum, which franchises operations of its chains in the Middle East, did not disclose a financial impact from the war.

Operating margins rose across brands in the quarter thanks to easing commodity costs, but Yum still missed profit expectations due to fluctuations in its tax rate.

Global same-store sales at Taco Bell rose 3%, while analysts were expecting a 3.7% rise, and Pizza Hut posted a 2% decline, against expectations for a 1.2% rise, according to LSEG data. KFC also missed expectations.

Total same-store sales at Yum Brands rose 1% in the fourth quarter ended Dec. 31, missing estimates of a 3.9% increase.

(Reporting by Deborah Sophia in Bengaluru; editing by Milla Nissi)

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