Taco Bell and KFC parent Yum Brands takes sales hit from war in the Middle East
Yum Brands Inc.’s fourth-quarter results were impacted by war in the Middle East region, which weighed on the company’s revenue.
Revenue rose 1% to $2.04 billion from $2.02 billion in the same period last year. Analysts surveyed by FactSet were looking for sales of $2.11 billion. The company’s same-store sales grew 1%. Analysts surveyed by FactSet were looking for same-store sales growth of 3.7%.
Speaking during a conference call to discuss the results, Yum
YUM,
CEO David Gibbs said topline sales were impacted by the conflict in the Middle East, with “varying degrees of impact” across markets in the Middle East, Malaysia and Indonesia. “This represented a low single digit headwind to Yum’s overall fourth quarter same store sales growth,” he added, noting that this trend continued into the first quarter.
Related: With restaurant prices likely to drop in 2024, here’s why Yum’s stock may be a better buy than McDonald’s
Yum shares climbed Wednesday, shrugging off the company’s weaker-than-expected fourth-quarter profit and revenue. After falling in premarket trading, Yum Brands’ stock rose 2.6%.
The parent of Taco Bell, Pizza Hut and KFC fast-food restaurants reported net income of $463 million, or $1.62 a share, compared with net income of $371 million, or $1.29 a share, in the prior year’s quarter. On an adjusted basis, Yum reported earnings of $1.26 a share, compared with $1.32 a share in the same period last year and below the FactSet consensus of $1.40. Yum Brands said earnings were impacted by a 23-cent headwind from fluctuations in its quarterly tax rate.
Yum’s KFC division had same-store sales growth of 2% during the fourth quarter, compared with 5% growth in the prior year’s quarter, while the Taco Bell division had same-store sales growth of 3%, compared with 11% growth in the same period last year. The Pizza Hut division had a same-store sales decline of 2%, compared with growth of 1% in the year-ago quarter.
Related: Yum’s KFC division agrees to acquire more than 200 KFC restaurants in the UK and Ireland from franchisee EG Group
During 2023, Yum said it opened a record 4,754 gross units. “We also made massive strides in scaling our proprietary digital and AI-driven ecosystem in partnership with our franchisees,” Yum Brands CEO David Gibbs said in a statement. In 2024, the company expects to cross 30,000 restaurants at KFC and 20,000 at Pizza Hut, with over 60,000 globally for Yum, he added.
Yum rivals have cited the impact of geopolitical issues in their recent results. Earlier this week, fast-food giant McDonald’s Corp.
MCD,
cited the war in the Middle East when it reported its fourth-quarter results and said it expected “macro challenges” to continue in 2024. Last week, coffee chain Starbucks Corp.
SBUX,
said that fighting in the Middle East hurt the company’s business in that region and in the United States.
On Tuesday, Mexican fast-casual chain Chipotle Mexican Grill Inc.
CMG,
topped Wall Street’s estimates in its fourth-quarter results, with consumer demand and higher prices on the menu outweighing higher ingredient costs.
Related: McDonald’s stock sees largest one-day loss in 18 months as it reveals impact from sales in the Middle East
Shares of McDonald’s rose 1.1% Wednesday, while Starbucks is down 0.7% and Chipotle rose 9.5%. Yum’s stock has fallen 0.7% in the last 52 weeks, compared with the S&P 500 index’s
SPX
gain of 21.3%.
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