Yum! Brands Reports Second-Quarter Results
13% System Sales Growth Driven by 9% Same-Store Sales Growth and 6% Unit Growth
Yum! Brands, Inc. (NYSE: YUM) today reported results for the second-quarter ended June 30, 2023. Worldwide system sales excluding foreign currency translation grew 13%, with 9% same-store sales growth and 6% unit growth. Second-quarter GAAP operating profit grew 4%. Second-quarter core operating profit grew 12%. Second-quarter GAAP EPS was $1.46 and second-quarter EPS excluding Special Items was $1.41. Second-quarter EPS includes a favorable $0.09 mark-to-market impact from unrealized investment gains and a negative $0.05 impact from foreign currency translation.
DAVID GIBBS COMMENTS
David Gibbs, CEO, said, "Our broad-based momentum continued in the second quarter with system sales growth of 13% owing to 9% same-store sales growth and 6% unit growth. KFC, our largest division, led the quarter with an astounding 19% system sales growth. An impressive 1,025 gross new units this quarter and nearly 30% digital sales growth contributed to our robust system sales growth. I remain confident we are well positioned to thrive in any consumer spending environment given the broad consumer appeal of our iconic brands, including our craveable products, compelling value and easy experiences. With our strong year-to-date results and continued momentum, we expect to deliver full year 2023 results well above our long-term growth algorithm for system sales and core operating profit growth.”
SECOND-QUARTER HIGHLIGHTS
- Worldwide system sales grew 13%, excluding foreign currency translation, with KFC at 19%, Taco Bell at 7% and Pizza Hut 7%.
- Added 1,025 gross new units.
- Record digital sales of $7 billion, with digital mix exceeding 45%.
- GAAP operating profit grew 4% and core operating profit grew 12%.
- Foreign currency translation unfavorably impacted divisional operating profit by $17 million.
| Reported Results | % Change | ||||
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| System Sales Ex F/X | Same-Store Sales | Units | GAAP Operating Profit | Core Operating Profit1 |
| KFC Division | +19 | +13 | +7 | +11 | +16 |
| Taco Bell Division | +7 | +4 | +5 | +6 | +6 |
| Pizza Hut Division | +7 | +4 | +4 | (2) | +1 |
| Worldwide | +13 | +9 | +6 | +4 | +12 |
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| Second-Quarter | Year-to-Date | ||||
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| 2023 | 2022 | % Change | 2023 | 2022 | % Change |
| GAAP EPS | $1.46 | $0.77 | +89 | $2.51 | $2.13 | +18 |
| Less Special Items EPS1 | $0.05 | $(0.29) | NM | $0.05 | $0.02 | NM |
| EPS Excluding Special Items | $1.41 | $1.06 | +33 | $2.46 | $2.11 | +17 |
| 1 See reconciliation of Non-GAAP Measurements to GAAP Results within this release for further detail of Core Operating Profit and Special Items. |
| All comparisons are versus the same period a year ago. |
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| System sales growth figures exclude foreign currency translation ("F/X") and core operating profit growth figures exclude F/X and Special Items. Special Items are not allocated to any segment and therefore only impact worldwide GAAP results. See reconciliation of Non-GAAP Measurements to GAAP Results within this release for further details. |
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| Digital system sales includes all transactions where consumers at system restaurants utilize ordering interaction that is primarily facilitated by automated technology. |
KFC DIVISION
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| Second-Quarter | Year-to-Date | ||||||
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| %/ppts Change |
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| %/ppts Change | ||
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| 2023 | 2022 | Reported | Ex F/X | 2023 | 2022 | Reported | Ex F/X |
| Restaurants | 28,500 | 26,521 | +7 | N/A | 28,500 | 26,521 | +7 | N/A |
| System Sales ($MM) | 8,298 | 7,252 | +14 | +19 | 16,355 | 14,985 | +9 | +15 |
| Same-Store Sales Growth (%) | +13 | (1) | NM | NM | +11 | +1 | NM | NM |
| Franchise and Property Revenues ($MM) | 416 | 394 | +5 | +9 | 828 | 777 | +7 | +11 |
| Operating Profit ($MM) | 326 | 293 | +11 | +16 | 631 | 584 | +8 | +14 |
| Operating Margin (%) | 47.7 | 43.2 | +4.5 | +4.6 | 46.0 | 43.6 | +2.4 | +2.8 |
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| Second-Quarter (% Change) | Year-to-Date (% Change) | ||
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| International | U.S. | International | U.S. |
| System Sales Growth Ex F/X | +22 | +5 | +17 | +4 |
| Same-Store Sales Growth | +15 | +5 | +13 | +4 |
- KFC Division opened 600 gross new restaurants across 60 countries.
- Foreign currency translation unfavorably impacted operating profit by $15 million.
| KFC Markets1 | Percent of KFC System Sales2 | System Sales Growth Ex F/X | |
| Second-Quarter (% Change) | Year-to-Date (% Change) | ||
| China | 25% | +32 | +24 |
| United States | 15% | +5 | +4 |
| Europe (excluding United Kingdom) | 12% | +19 | +23 |
| Asia | 11% | +12 | +12 |
| Australia | 7% | +10 | +10 |
| United Kingdom | 7% | +10 | +7 |
| Middle East / Turkey / North Africa | 6% | +41 | +34 |
| Latin America | 6% | +17 | +18 |
| Africa | 5% | +18 | +17 |
| Thailand | 2% | +13 | +14 |
| Canada | 2% | +6 | +6 |
| India | 2% | +22 | +24 |
| 1Refer to investors.yum.com/financial-information/financial-reports/ for a list of the countries within each of the markets. |
| 2Reflects Full Year 2022 adjusted for the exclusion of Russia. |
TACO BELL DIVISION
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| Second-Quarter | Year-to-Date | ||||||
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| %/ppts Change |
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| %/ppts Change | ||
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| 2023 | 2022 | Reported | Ex F/X | 2023 | 2022 | Reported | Ex F/X |
| Restaurants | 8,320 | 7,900 | +5 | N/A | 8,320 | 7,900 | +5 | N/A |
| System Sales ($MM) | 3,760 | 3,509 | +7 | +7 | 7,224 | 6,617 | +9 | +9 |
| Same-Store Sales Growth (%) | +4 | +8 | NM | NM | +6 | +6 | NM | NM |
| Franchise and Property Revenues ($MM) | 218 | 199 | +9 | +9 | 419 | 378 | +11 | +11 |
| Operating Profit ($MM) | 228 | 215 | +6 | +6 | 432 | 400 | +8 | +8 |
| Operating Margin (%) | 36.8 | 36.7 | 0.1 | 0.1 | 36.2 | 36.2 | Even | Even |
- Taco Bell Division opened 63 gross new restaurants across 9 countries.
- Taco Bell U.S. system sales grew 6% and Taco Bell International system sales excluding foreign currency grew 18%.
- Taco Bell U.S. same-store sales grew 4% and Taco Bell International same-store sales declined 1%.
- Company-owned restaurant margins were 25.6%, approximately flat year-over-year.
- Foreign currency translation unfavorably impacted operating profit by less than $1 million.
PIZZA HUT DIVISION
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| Second-Quarter | Year-to-Date | ||||||
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| %/ppts Change |
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| %/ppts Change | ||
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| 2023 | 2022 | Reported | Ex F/X | 2023 | 2022 | Reported | Ex F/X |
| Restaurants | 19,242 | 18,591 | +4 | N/A | 19,242 | 18,591 | +4 | N/A |
| System Sales ($MM) | 3,201 | 3,039 | +5 | +7 | 6,537 | 6,199 | +5 | +8 |
| Same-Store Sales Growth (%) | +4 | (3) | NM | NM | +5 | (1) | NM | NM |
| Franchise and Property Revenues ($MM) | 149 | 142 | +5 | +7 | 304 | 293 | +4 | +7 |
| Operating Profit ($MM) | 91 | 93 | (2) | +1 | 195 | 195 | Even | +4 |
| Operating Margin (%) | 37.3 | 39.2 | (1.9) | (1.3) | 39.3 | 40.7 | (1.4) | (0.7) |
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| Second-Quarter (% Change) | Year-to-Date (% Change) | ||
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| International | U.S. | International | U.S. |
| System Sales Growth Ex F/X | +11 | +2 | +10 | +6 |
| Same-Store Sales Growth | +6 | +1 | +6 | +5 |
- Pizza Hut Division opened 357 gross new restaurants across 42 countries.
- Foreign currency translation unfavorably impacted operating profit by $2 million.
| Pizza Hut Markets1 | Percent of Pizza Hut System Sales2 | System Sales Growth Ex F/X | |
| Second-Quarter (% Change) | Year-to-Date (% Change) | ||
| United States | 41% | +2 | +6 |
| China | 16% | +25 | +25 |
| Asia | 14% | +4 | +2 |
| Europe | 14% | Even | +1 |
| Latin America | 6% | +6 | +6 |
| Middle East / Africa | 4% | +24 | +17 |
| Canada | 3% | +7 | +7 |
| India | 2% | +11 | +13 |
| 1Refer to investors.yum.com/financial-information/financial-reports/ for a list of the countries within each of the markets. Note that during the first quarter of 2023 Pizza Hut Division realigned their international market structure. |
| 2Reflects Full Year 2022 adjusted for the exclusion of Russia. |
HABIT BURGER GRILL DIVISION
- The Habit Burger Grill Division opened 5 gross new restaurants in the U.S.
- The Habit Burger Grill Division system sales grew 9% with flat same-store sales growth.
RUSSIA UPDATE
- On April 17, 2023, Yum! Brands completed its exit from the Russian market by selling its KFC business in Russia to Smart Service Ltd., including all Russian KFC restaurants, operating system, master franchise rights and the trademark for the Rostik's brand. With the completion of the transaction, we ceased our corporate presence in Russia.
- As of the beginning of the second quarter 2022, we elected to remove Russia from our unit count and system sales. Yum! and KFC Division system sales growth excluding foreign currency were negatively impacted by 1 and 2 percentage points, respectively, for the year to date ended June 30, 2023.
OTHER ITEMS
- During the quarter we revised certain tabular data in our Earnings Release to clarify the line items within our condensed consolidated results that are impacted by Special Items as shown on pages 15 and 16 within this release including ex-special general and administrative expenses.
- During the quarter, we paid our Revolving Facility down $164 million and ended the quarter at net leverage of 4.7x. Our current outstanding debt has a weighted average remaining term of 6 years with a fixed-floating ratio greater than 90%.
- Disclosures pertaining to outstanding debt in our Restricted Group capital structure will be provided at the time of the filing of the second-quarter Form 10-Q.
