Global same-store sales rose 2%, missing analysts’ target of 2.37%.
Yum Brands (YUM) shares fell over 5% on Tuesday, the most in four months, after the fast food chain missed revenue and profit expectations for the second quarter, even as retail sentiment climbed higher.
Yum’s results showed continued weakness in its home market, the United States, as consumers cut back on dining out amid economic uncertainty, and more notably, a slowdown at Taco Bell, the company’s growth driver in recent quarters.
Revenue rose 10% to $1.93 billion in the second quarter, missing the FactSet estimate of $1.94 billion. Adjusted earnings were $1.44 per share, down from $1.35 last year and below analysts’ estimate of $1.46.
Yum’s global same-store sales, a more widely watched metric, rose 2%, also missing expectations of 2.37% growth, weighed by particular weakness for KFC and Pizza Hut in the U.S.
On Stocktwits, the retail sentiment for YUM shifted to ‘bullish’ as of late Tuesday, from ‘bearish’ the previous day, while message volume rose 200% in the past 24-hour period. YUM shares are up 4% year-to-date.
Barclays, which kept its ‘Overweight’ rating but trimmed its price target slightly, said the results were largely “in line” and Yum should be rewarded for its global defensive prowess.
In Q2, Taco Bell’s global same-store sales rose 4%, while KFC posted a 2% increase and Pizza Hut saw a 1% decline. That marks a slowdown for Taco Bell, which reported 5% growth in the same quarter last year.
In the U.S., KFC’s same-store sales dropped sharply, down 8%, while Pizza Hut’s same-store sales declined 5%.
To be sure, Yum appointed a new CEO at KFC and a president for the chain’s U.S. business recently.
Yum’s total restaurant count grew by 3% in the quarter, boosted by the addition of 871 new locations, largely fueled by international KFC expansions.
“Yum! is in an enviable position,” CEO David Gibbs said. “Taco Bell U.S. meaningfully outpaced the category with 4% same-store sales growth, and KFC International opened 565 gross new units.”
CFO Chris Turner will succeed Gibbs as chief executive on Oct. 1.
Last month, Chipotle Mexican Grill (CMG) trimmed its annual sales outlook and also reported quarterly sales that fell short of expectations. McDonald’s (MCD), which is scheduled to report earnings on Wednesday, had flagged challenging market conditions due to tariffs back in May.
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