Yum Brands wrong estimates as Russia’s exit and foreign currency weigh heavily on sales

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Yum Brands (YUM), the parent company of KFC, Taco Bell and Pizza Hut, reported fiscal second-quarter earnings that fell short of expectations as China’s lockdowns and exit from Russia weighed on sales, as well as macroeconomic pressures. such as inflation and exchange.

Here are Yum Brand’s second quarter results compared to Wall Street’s consensus estimates, compiled by Bloomberg:

  • Income: $ 1.64 billion versus $ 1.65 billion expected

  • adj. earnings per share (EPS): $ 1.05 versus $ 1.09 expected

  • Global sales in the same store: Growth of 1% versus an expected growth of 0.75%.

Blocks in China heavily dragged global comparable sales down. Excluding China, the company recorded sales growth in the same store of 6%.

On an individual basis, sales at the same store have also been weak, with the exception of Taco Bell, which is relatively isolated from overseas pressures compared to KFC and Pizza Hut.

KFC missed its sales estimates in the same store for the quarter (-1% versus + 0.45% expected). Yum removed 1,112 units in Russia from the global KFC unit count, causing KFC’s year-over-year operating profit growth (excluding foreign currency) to drop by 4 percentage points.

Sales in the same store as KFC in China grew by 7%, the company said. China is KFC’s largest market for system-wide sales with 27%. It is the second largest for Pizza Hut with 16%.

Pizza Hut reported a larger-than-expected loss in same-store sales of -3% versus -1.04% expected.

Persistent staff shortages, including a recent shortage of delivery drivers, have hampered the ability to meet demand. Yum also removed 53 units in Russia from Pizza Hut’s global unit count.

Excluding China, sales in the same Pizza Hut International store grew by 6%.

Taco Bell was the only company to exceed estimates with global sales in the same store posting + 8% versus + 4.03% expected, helped by the return of Mexican pizza and strong international growth.

Sales of Taco Bell systems in the United States grew 9%, while sales of Taco Bell International systems increased 31%.

The shares were relatively flat in pre-market trading.

“Our systems sales in the second quarter grew 5% excluding Russia, driven by sustained development momentum. Despite a complex operating environment and the strongest same-store sales growth in our history, our global business continues. to perform well, “Yum CEO David Gibbs said in a press release, citing the impressive sales results in the same store as Taco Bell.

Despite the lackluster quarter, there is cautious optimism that the company will recover in the second half of the year.

Last month, Goldman Sachs (GS) issued a double update on the stock, setting a Buy rating with a target price of $ 135 per share (from $ 125).

Analyst Jared Garber said the fast food company’s high-franchise mix and strong unit growth can help offset macro-volatility. He added that the technology remains a positive lifeline, crediting the brand’s digital advancements.

The company saw second-quarter digital systems sales reach nearly $ 6 billion.

Over the past 3 years, Yum has “acquired several digital / tech companies that are helping to drive both operational improvements in restaurants and more targeted marketing options,” the analyst wrote.

“We see these investments as a winning formula for the continued growth of the e units [same-store sales] growth, while helping improve franchisee operations and profits and helping drive the business share growth opportunity of YUM’s platform, ”he continued.

Yum Brands has revealed that Taco Bell will increase its international presence as the brand leans on popular menu items like Mexican pizza.

Yum Brands has revealed that Taco Bell will increase its international presence as the brand leans on popular menu items like Mexican pizza.

Another bright spot in the quarters to come? Innovation.

A greater emphasis on introducing new products and the return of fan-favorite menu items, such as KFC’s Chicken Nuggets and Taco Bell’s Mexican Pizza (which will return as a permanent menu item September 15) – helped drive demand as innovation slows in the fast food industry in general.

According to the pedestrian traffic analysis platform Placer.ai, nationwide visits to Taco Bell have increased in the wake of the May reintroduction of Mexican Pizza. Meanwhile, the KFC locations in Charlotte, North Carolina (where the nuggets are currently being tested) saw an increase in traffic patterns the week of launch.

The company revealed during its latest earnings call that it is in line with previous expectations for teen base operating profit growth in the second half of the year.

Shares of Yum Brands have declined approximately 10% since the beginning of the year.

Alexandra is a Senior Entertainment and Food Reporter at Yahoo Finance. Follow her on Twitter @ alliecanal8193 and email her to alexandra.canal@yahoofinance.com

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