Yum! Brands, the parent company of KFC and Pizza Hut, saw its stock rise on Tuesday following a positive outlook for its value-driven Taco Bell brand. This uptick comes as consumers tighten their spending on non-essential items.
Though revenue increased compared to last year, it fell short of analysts’ expectations. Sales at KFC and Pizza Hut were lower, while Taco Bell saw a boost.
The emphasis on value is also being adopted by other major fast-food chains like McDonald’s, which are working to attract customers who are concerned about high prices.
Yum! Brands Reports Mixed Results but Optimism for Taco Bell.
Yum! Brands (YUM) saw its stock climb during Tuesday’s trading, despite the company’s second-quarter sales and net income coming in below forecasts. Executives highlighted Taco Bell’s strong performance as a bright spot, especially as consumers seek better value for their money.
The company, which owns Taco Bell, Pizza Hut, and KFC, reported revenue of $1.76 billion for the second quarter, which was slightly below analysts’ expectations. Net income reached $367 million, also missing estimates, but adjusted net income of $386 million exceeded predictions after accounting for one-time expenses.
Taco Bell Leads Sales Growth Amid Industry-Wide Focus on Value
Same-store sales at Taco Bell increased by 5% year-over-year. In contrast, lower sales at KFC and Pizza Hut led to a 1% decline in same-store sales for Yum! Brands overall, matching its performance from the first quarter.
CEO David Gibbs expressed confidence in Taco Bell’s performance, noting its status as a “value brand” during a period when consumers are being more cautious with their spending.
The focus on value is shared by other fast-food leaders like McDonald’s (MCD) and Wendy’s (WEN), which have noted a decrease in discretionary spending among consumers, particularly those with lower incomes. Gibbs reassured that Yum!
Brands is well-positioned to handle these consumer challenges, as Taco Bell and KFC are known for offering good value.
Yum! Brands’ stock increased by 3.6% to $138.05 by 2:10 p.m. ET on Tuesday, adding to a recent 10% gain over the past two weeks.