During Yum Brands’ second quarter earnings call Tuesday morning, executives played up the company’s sequential improvements over its first quarter and that was evident in the numbers. During the first quarter, for instance, global same-store sales declined by 3% – the company’s first negative quarter since 2020 – while they were down by just 1% in Q2.
That said, things remained tough, especially domestically. The exception is Taco Bell, which experienced a strong tailwind from its Cantina Chicken Menu launch in mid-March. The new platform has exceeded expectations so far, according to CEO David Gibbs, helping to drive 5% same-store sales growth at the brand, which represents 37% of Yum’s divisional operating profit.
The chain’s foray into an “elevated chicken platform” has increased Taco Bell’s chicken sales mix by 10 (percentage) points, with nearly one in four orders including a Chicken Cantina item, Gibbs said. Digital sales have also buoyed the brand, with loyalty sales growing by over 30% in Q2.
Pizza Hut U.S. also made significant progress, with same-store sales down 1% versus negative 6% in Q1. In a value-heavy environment, Pizza Hut benefited from its $7 Deal Lover’s Menu, as well as the continued rollout of the Dragontail AI-enabled restaurant management system, which has helped generate higher customer satisfaction scores, executives said.
“In the U.S., [Pizza Hut] momentum accelerated throughout the quarter with an increase in weekly-per-restaurant average transactions attributable to a number of value-based promotions and the launch of ‘My Hut Box,’” chief financial officer Chris Turner said. The My Hut Box allows customers to choose between Melts or a two-topping personal pan pizza, plus a side of fries or four boneless wings, and a 20-ounce drink starting at $6.99.
Meanwhile, The Habit Burger Grill’s same-store sales fell by 6% during the quarter, compared to negative 8% during the first quarter. Despite the sales slip, Habit expanded its restaurant-level margins by 520 basis points compared to Q1 due to a “comprehensive store-level optimization effort.” The California-based chain also increased its unit count by 5% year-over-year.
Finally, KFC U.S.’s performance continued to struggle, with same-store sales declining 5% following a 7% decline in Q1, despite its entry into the current value wars with the Taste of KFC Deal. Little color was provided about any potential turnaround plans for the company’s flagship brand, though executives noted that there are signs of “improving fundamentals” across all of Yum’s brands.
At Taco Bell, for example, “sensitivities to check management” have improved, and items per transaction have grown. Commodity inflation is lower than expected. And, digital sales and technology efforts continue to be a highlight for the company. At KFC, those efforts include the expansion of the “super app” to support restaurant general managers, and the loyalty program, which is now live in 14 international markets.
“While our teams work to improve system sales trends, we are confident the investments we are making to be more agile, resilient, and stronger as part of the next phase in our technology journey will lead to a promising year in 2025,” Gibbs said.
Yum Brands Q2 by the numbers
- Global system sales grew 3%
- Global same-store sales declined by 1%
- Global unit count grew 5%, including 894 gross new units
- Global core operating profits grew 10%
- KFC U.S. same-store sales fell 5%
- Taco Bell U.S. same-store sales grew 5%
- Pizza Hut U.S. same-store sales fell 1%
- The Habit Burger Grill same-store sales fell 6%
Contact Alicia Kelso at [email protected]
