The fast-food giant, Yum Brands, exceeded Wall Street’s expectations for comparable sales in the fourth quarter of 2024. This strong performance was primarily fueled by Taco Bell’s value offerings, which resonated with budget-conscious consumers in the United States. The positive results sent Yum Brands’ shares soaring by approximately 7%.
Table Content:
Value Meals Prove Popular Amidst Economic Pressures
In a challenging economic environment characterized by high inflation and rising borrowing costs, consumers are increasingly seeking affordable dining options. Fast-food chains, including McDonald’s and Burger King, have responded by emphasizing value meals to stimulate demand. Yum Brands has adopted a similar strategy, with Taco Bell leading the charge.
Taco Bell and KFC Drive Growth
Taco Bell’s “Luxe Carvings Box,” a value meal priced from $5, proved immensely popular, contributing to a 5% increase in same-store sales at U.S. locations during the fourth quarter. Simultaneously, Yum Brands has focused on expanding KFC’s international presence, resulting in a 1% global same-store sales growth for the fried chicken chain. Notably, KFC thrived in the Middle East and North Africa, achieving a remarkable 21% sales increase despite regional geopolitical challenges that impacted other Western fast-food brands. According to CFO Chris Turner, KFC transactions in the region had rebounded to pre-conflict levels by December.
Core Operating Profit and Long-Term Outlook
Yum Brands’ core operating profit, primarily derived from Taco Bell U.S. and KFC International, experienced an 8% surge in 2024, excluding the impact of an extra week. The company anticipates maintaining this momentum, projecting at least 8% growth in core operating profit for the current year, aligning with its long-term target. Overall, worldwide same-store sales for Yum Brands rose by 1% in the fourth quarter, surpassing analysts’ estimates of a 0.42% increase.
Digital Transformation and Technological Investments
Yum Brands executives highlighted the company’s ongoing efforts to enhance the customer experience through digitalization. CEO David Gibbs revealed that half of Yum Brands’ stores outside China are equipped with ordering kiosks, with plans to expand this to at least 70% by 2026. This digital push is reflected in the fact that digital orders now constitute over half of Yum Brands’ sales. To support this growth, the company is investing in advanced technologies, including its AI-powered “Byte by Yum” software, aimed at optimizing restaurant operations, reducing wait times, improving delivery efficiency, and managing pricing and promotions within its app. Yum Brands recently consolidated its in-house software services for franchisees under the “Byte” umbrella.
Financial Performance and Pizza Hut’s Recovery
On an adjusted basis, Yum Brands reported earnings of $1.61 per share for the fourth quarter, exceeding estimates by one cent. While Pizza Hut experienced a 1% decline in same-store sales, this represents a sequential improvement compared to the 4% drop in the third quarter, signaling a potential turnaround for the pizza chain.
Conclusion: Strong Performance and Positive Outlook for Yum Brands
Yum Brands’ fourth-quarter results demonstrate the effectiveness of its strategic focus on value offerings and digital innovation. The company’s ability to adapt to evolving consumer preferences and navigate economic challenges positions it for continued growth in the competitive fast-food landscape. The strong performance of Taco Bell and KFC, coupled with investments in technology and international expansion, reinforces Yum Brands’ position as a leading player in the global quick-service restaurant industry.
