Yum! Brands (YUM 1.03%), a global leader in the fast-food industry, announced its first-quarter earnings on May 1, delivering mixed results that came up slightly short of analysts' expectations. The company reported adjusted earnings of $1.15 per share, a 9% increase over the previous year but below the consensus estimate of $1.20 per share. Total revenue fell 3% year over year to $1.6 billion, which did not meet the anticipated $1.71 billion. However, though the company may not have lived up to Wall Street's hopes, its quarter did feature a notable achievement in digital sales, as well as aggressive unit growth.
| Metric | Q1 2024 | Q1 2024 Analysts Estimate | Q1 2023 | % Change |
|---|---|---|---|---|
| EPS (excluding special Items) | $1.15 | $1.20 | $1.06 | 9% |
| Revenue | $1.6 billion | $1.71 billion | $1.65 billion | (3%) |
Business overview and strategy
Yum! Brands controls the major fast-food brands KFC, Taco Bell, and Pizza Hut. With its franchise-driven growth model, the company has effectively expanded its global footprint, where its digital and technology integration is playing a crucial role in enhancing customer experience and operational efficiency. In Q1, it added more than 800 new locations, growing its total footprint by 6% to more than 60,000 restaurants worldwide. That aggressive expansion strategy notwithstanding, same-store sales declined by 3%, with the Pizza Hut unit proving a particular laggard -- its same-store sales slid by 7%.
The company's focus on digital sales in recent years continues to be a key factor. Digital's share of its sales mix for the quarter topped 50% for the first time, indicating that consumers' preference for digital ordering continues to increase.
Quarter highlights
The quarter witnessed mixed performance across its brand portfolio. Notably, the KFC and Taco Bell divisions showed resilience with a 4% growth in system sales, while Pizza Hut delivered a 4% decline, underscoring the challenges it faces within the pizza niche. Yum! Brands' commitment to a franchise-driven growth model contributed to a robust 6% unit growth amid sales challenges. The impact of foreign currency translation unfavorably affected its financials this quarter, a common plight for global businesses.
Yum! Brands' pivot toward digitalization in its business manifested in record digital sales, showing how it has leveraged technological advancements to improve customer engagement. Despite the revenue miss, the quarter saw core operating profit growth. The variances in segment performance and the ongoing digital transformation initiatives highlight the company's adaptability in a dynamic market environment.
