Yum Brands gets a lift as KFC’s cheaper options draw more customers

Reuters | August 3, 2023

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By Deborah Mary Sophia

(Reuters) -Yum Brands on Wednesday beat estimates for quarterly comparable sales and profit as strong demand for cheaper meals and promotional offers at its KFC restaurants countered lackluster traffic at its Taco Bell and Pizza Hut outlets.

Quarterly comparable sales at KFC jumped 13% and topped estimates for an 8.29% growth, as options like the 2-for-$5 fried chicken wrap and launches including chicken nuggets pulled in lower-income consumers struggling with high food prices.

KFC saw the most growth in the U.S. with its lower-income consumers, CEO David Gibbs said on a post-earnings call, with the offerings also appealing to new younger customers.

The fried-chicken chain also opened 600 new restaurants across 60 countries in the quarter.

“Chicken has been pretty popular lately…as more and more consumers are consuming chicken over beef, and (KFC has) really went after that market,” said Edward Jones analyst Brian Yarbrough.

U.S. restaurant chains including McDonald’s and Chipotle have signaled that more diners are choosing chicken at a time when beef prices have remained stubbornly high.

Yum Brands’ revenue rose 3% to $1.69 billion but fell short of estimates of $1.75 billion, largely due to weaker-than-expected sales at Taco Bell and Pizza Hut.

Yum Brands’ value offerings have also drawn customers from higher-income levels – diners have increasingly started to trade down to the chains from higher-priced fast-casual restaurants, while existing customers have also increased their frequency of purchases, CFO Chris Turner said in an interview.

Excluding items, Yum Brands earned $1.41 per share, above estimates of $1.24. The company is benefiting from cooling costs of key commodities that had peaked following the COVID-19-related disruptions and aggravated by the Russia-Ukraine crisis.

Total same-store sales rose 9%, beating analysts’ estimates of a 7.01% increase, according to Refinitiv IBES data.

The company’s shares were marginally higher in early trading.

(Reporting by Deborah Sophia in Bengaluru; Editing by Shinjini Ganguli and Sriraj Kalluvila)