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Any momentum Yum Brands had was pushed by Taco Bell’s outstanding performance, driven by marketing buzz and menu innovation, chiefly, bringing back the fan-favorite Mexican pizza.

Taco Bell’s Mexican pizza was the superstar of Yum Brands’ tough second quarter

KFC and Pizza Hut struggled comparatively, thanks to delivery driver shortages and COVID restrictions in China

Yum Brands saw mixed results for the second quarter ended June 30, 2022, with just 1% same-store sales growth globally and 4% unit growth systemwide. Any momentum the company had was pushed by Taco Bell’s outstanding performance, driven by marketing buzz and menu innovation, chiefly, bringing back the fan-favorite Mexican pizza.

On the other hand, KFC struggled in global markets as one of the brand’s biggest markets, China, experienced nationwide shutdowns to combat the latest wave of COVID-19, and reported a 1% increase in systemwide sales. Pizza Hut, whose sales remained flat throughout the quarter, was impacted greatly by the delivery driver shortage, though that has been slightly offset by the company’s growth of third-party aggregator partnerships (now 70% of Yum Brands stores are available via at least one delivery service).

“We're focused on addressing the availability of drivers to deliver the product whenever a customer wants to order through that channel,” Yum Brands CFO Chris Turner said during the quarterly earnings call on Wednesday. “[…] We’re changing things like our hiring practices to make a faster hiring process, and we also talked about expanding our delivery partnerships which shifted from 45% at the beginning of the quarter to 70% at the end.”

For now, Turner said, only 35% of Yum Brands stores are listed on more than one marketplace, but those that are see mid-single digits higher performance than their colleagues, which indicates the strength of digital sales

Despite the sluggish sales, particularly in global markets, Yum Brands’ Q2 performance was bolstered by rapid development, especially KFC which opened more than 400 gross new units last quarter. Taco Bell was again the best performing brand of the four Yum Brands during the second quarter, with 8% same-store sales growth timed with the re-introduction of Mexican Pizza, which in some stores, sold out after just a week on the menu.

“The team achieved these results through exceptional execution of a well-balanced marketing agenda that sustained brand buzz, distinctive product news and compelling value offerings,” Yum Brands CEO David Gibbs said during Wednesday’s call. “And that was all supported by operational improvements and a focus on elevating the digital experience. […] Talk about remaining the culture leader in the industry, successfully executing on its strategy to inspire and enable the world to “Live Mas” through innovative marketing campaigns, buzzworthy brand news, distinctive products and strong value offering.”

Taco Bell also saw a 10% increase in loyalty program members during the quarter, especially since members could access the Mexican Pizza before anyone else.

Yum Brands’ revenue increased 2% to $1.6 billion from the same quarter the year prior. The company reported second quarter net income of $224 million, or $0.78 earnings per share, down 43% from $391 million, or $1.31 per share the same quarter the year prior.

Contact Joanna Fantozzi at [email protected]

Follow her on Twitter: @joannafantozzi


TAGS: Finance
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