KFC, Pizza Hut sales slump as sticky inflation hampers parent Yum's bottom line

KFC and Pizza Hut parent Yum Brands reported a bigger-than-expected fall in same-store sales for the second quarter as sticky inflation discouraged lower-income Americans from spending on dining out.

Same-store sales at the company’s KFC division fell 5% in the United States in the second quarter, compared with a 7% decline in the prior quarter, while Pizza Hut reported a decline of 1%, Yum said Tuesday.

Like its peers in the fast-food industry, Yum, which also owns Taco Bell, has been investing in loyalty programs and refreshing its menus in an attempt to appeal to budget-conscious consumers.

However, stiff competition for value meals and promotions has dogged Yum’s KFC business, with consumers increasingly preferring to cook more affordable meals at home.

The Colonel Sanders-founded fried chicken chain introduced a value menu in April that will last through the year to combat the effects of inflation on its sales.

A KFC restaurant in Saddle Brook, NJ on October 17, 2023. — KFC reported on Tuesday a same-store sales decline in its US division as a result of sticky inflation and low consumer spending. Christopher Sadowski

The Meal for One offers two pieces of chicken, mashed potatoes, gravy and a biscuit for $4.99. The $20 Family Meal includes six pieces of chicken, four sides and four biscuits.

Still, KFC came up short in its head-to-head brawl with other fast food value meals.

The persistent sales challenge fell in line with other fast food giants, like McDonald’s and Domino’s, who saw US customers flee during the pandemic and return in dwindling numbers thanks to high food prices.

“I’m incredibly pleased with how well our teams have managed through a challenging operating environment,” Yum Brands CEO David Gibbs said in a statement.

Taco Bell emerged as its parent company’s saving grace. Its same-store sales grew 5%, pulling ahead of LSEG analysts’ expectations of 3.6%.

Taco Bell reported same-store sales growth, likely due to its value menu and technology improvements. REUTERS

Gibbs attributed the Taco Bell growth to “unmatched, crave-worthy innovation” with the popularity of its new Cantina Chicken menu and a Taco Tuesday promotion.

The Taco Tuesday promotion was a limited-time $5 Taco Discovery Box available for a few weeks in April and June. The value meal included a Crunchy Taco, Doritos Locos Taco, Cantina Chicken Chicken Crispy Taco and a medium drink.

Yum’s overall same-stores sales declined by 1%, which was an improvement from the 3% decline in the first quarter but disappointing compared to LSEG analysts’ estimates of a 0.2% dip.

The company reported a 10% increase in overall core operating profit and reaffirmed its forecast of an 8% increase in full-year core operating profit.

Excluding items, the company reported a profit of $1.35 a share, just above LSEG analysts’ estimates of $1.33 a share.

Gibbs said the company was focusing on its technology improvements, such as adding more kiosks and implementing AI at restaurants to speed up service times – like the drive-thru voice technology used at some Taco Bell locations.