Yum! Brands released its second-quarter financial results on Wednesday, delivering a mixed performance. The restaurant operator did not disclose the impact of the Cyclospora outbreak linked to its Taco Bell locations, even as other unaffected chains also experienced revenue declines.
Where to begin
The company's quarterly earnings were a blend of strengths and weaknesses, with no commentary on how the parasitic infection tied to Taco Bell's supply chain has affected its business. According to data from market research firm Placer.ai, Taco Bell has seen double-digit percentage declines in daily foot traffic since mid-July, when the U.S. Food and Drug Administration identified the outbreak's source as iceberg lettuce used by the brand. Taco Bell serves as Yum's primary growth driver, and this crisis poses a significant short-term threat to its expansion trajectory.
The reported quarter ended on June 30, predating the foodborne illness outbreak. During the earnings call at 8:15 AM ET, management is likely to face questions about Taco Bell's traffic slowdown and the potential impact on future profitability. The company does not typically provide guidance for full-year or next-quarter same-store sales and earnings per share.
Even without involvement in the food safety incident, many restaurant brands have seen weakening revenues. Chipotle Mexican Grill's management noted that consumer hesitation regarding brands selling fresh lettuce persisted through late July, weighing on store sales.
Based on consensus estimates from Refinitiv, Yum's key financial metrics compared to expectations are as follows: Adjusted earnings per share came in at $1.62, above the forecast of $1.58. Total revenue was $2.17 billion, falling short of the expected $2.2 billion. Second-quarter net income was $853 million, or $3.08 per share, up from $374 million, or $1.33 per share, in the same period last year. Excluding costs related to the Pizza Hut strategic review and other special items, earnings per share were $1.62. Driven by global new store openings, net revenue rose 12% to $2.17 billion. Global same-store sales grew 3% in the quarter, roughly matching the 2.9% market estimate from StreetAccount.
Brand-level performance breakdown
Taco Bell: Same-store sales surged 7%, maintaining its position as Yum's strongest growth segment over the long term. KFC: Global same-store sales increased by 2%; in China, its largest market, system-wide sales rose 6%. Pizza Hut: Same-store sales declined by 1%. Last month, Yum announced it would sell the struggling Pizza Hut chain to private equity firm LongRange Capital and Yum China for $2.7 billion.
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