YUM! Brands, Inc. operates approximately 56,425 restaurants across 155 countries and territories under the concepts of KFC, Taco Bell, Pizza Hut and The Habit Burger Grill. Today, >98% of the Company’s restaurants are owned and operated by its franchisees. Specifically, KFC offers fried and non-fried chicken products. Taco Bell specializes in Mexican-style food products. Pizza Hut specializes in the sale of ready-to-eat pizza products. The Habit Burger Grill specializes in chargrilled burgers and sandwiches made-to-order over an open flame and topped with fresh ingredients.
Long-term growth driver riding on product innovation and digitalisation. Over the years, Yum! Brands emphasizes on its Recipe for Growth to become more focused, franchised and efficient, as well as its Recipe for Good that concentrates on three priority pillars including People, Food and Planet. Through such focuses, Yum! Brands aims to deliver 5% global unit growth, 7% global system sales growth and core operating profit growth of at least 8% under its long term growth target.
An asset-light model with multi-branding. Over 98% of Yum! Brands' restaurants are operated under a franchised model. Today, China remains the largest contributor, with its KFC brand accounting for the majority of store openings, followed by Taco Bell and Pizza Hut. In 2Q23, KFC reported the strongest same-store sales growth at 13% y-o-y, followed by Taco Bell (+4%), and Pizza Hut (+4%).
Macro downturns. Yum! Brands’ encountered 5-year CAGR topline growth of 3% in 2018-22, below peers, while EBITDA 5-year CAGR growth reached 3.8% over the same period. The Company has relied on digitalisation and delivery services to help sustain its market share. As of 2Q23, Yum's digital sales reached over 45% of global system sales. While its revenue and EBITDA forecasted growth is expected to pick up, it remains weaker than its direct peers. Nevertheless, more time is needed to attest the sustainability of its performance.
Prolonged hyperinflation that affects costs on raw materials and wages; unfavourable forex impacts; new pandemics; etc.While the Company also announced the authorisation of up to US$2bn in its share repurchases earlier this year, considering the low global market visibility, we stay conservative and recommend a HOLD rating.
I would not invest in this especially with the latest earnings guidance.
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