Yum Brands, the parent company of popular fast-food chains such as KFC, Taco Bell, and Pizza Hut, recently reported disappointing earnings and revenue for the last quarter of 2023. The company cited the Israel-Hamas war as one of the factors that impacted its sales. Yum Brands is not alone in facing this challenge, as Starbucks and McDonald’s also reported lower-than-expected revenue, attributing it to the same conflict.
Yum Brands CEO, David Gibbs, addressed the issue during the company’s conference call with analysts, stating, “During the quarter, topline sales were impacted by the conflict in the Middle East region with varying degrees of impact across markets in the Middle East and Malaysia and Indonesia.” He further explained that this conflict resulted in a low-single-digit headwind to Yum’s overall sales growth. Gibbs also mentioned that these sales trends are expected to continue into the first quarter of this year but are likely to taper off throughout the year.
As a result of these disappointing financial results, Yum Brands’ stock fell 1% in premarket trading. Let’s take a closer look at the specific numbers reported by the company and how each brand within its portfolio performed.
Earnings per share came in at $1.26 adjusted, falling short of the expected $1.40. Similarly, revenue was reported at $2.04 billion, missing the estimated $2.11 billion. Despite these figures, Yum Brands’ fourth-quarter net income showed improvement compared to the previous year, with $463 million or $1.62 per share, up from $371 million or $1.29 per share.
When examining individual brands within Yum’s portfolio, Pizza Hut experienced a decline in same-store sales by 2%, failing to meet expectations of 0.6% growth. The U.S. market saw a more significant drop with a 4% decrease in same-store sales, while international same-store sales remained flat. Yum Brands attributed these declines to the impact of the Israel-Hamas war, as some activists called for a boycott of Pizza Hut after its Israeli franchisee posted an Instagram story implying it provided free pizza to Israeli soldiers.
KFC, on the other hand, reported a 2% increase in same-store sales, falling short of StreetAccount estimates of 4.7%. To revive sales, KFC’s U.S. team plans to launch the smashed potato bowl and the chain’s first loyalty program in the first quarter of this year.
Taco Bell, which is usually a standout performer within Yum’s portfolio, also underperformed Wall Street’s expectations. The Mexican-inspired chain reported a 3% growth in same-store sales, missing StreetAccount estimates of 3.8%. This is a significant drop compared to the previous year when Taco Bell achieved an impressive 11% growth in same-store sales, driven by the permanent return of its cult-favorite Mexican Pizza.
Looking ahead, Yum Brands has ambitious plans for its global footprint in 2024. The company aims to surpass 60,000 locations, with KFC alone having more than 30,000 restaurants and Pizza Hut exceeding 20,000 locations. Despite the current challenges faced by Yum Brands and its brands’ performance in the last quarter, the company remains optimistic about its future growth prospects.
In conclusion, Yum Brands reported disappointing earnings and revenue for the last quarter of 2023, citing the impact of the Israel-Hamas war on its sales. This trend was also observed in other global restaurant giants such as Starbucks and McDonald’s. While Pizza Hut experienced declines in same-store sales, KFC and Taco Bell fell short of Wall Street’s expectations. However, Yum Brands remains focused on its long-term growth plans and aims to surpass significant milestones in terms of its global footprint in 2024.