NEW YORK — Yum Brands is heavily investing in value offerings, but Taco Bell stands out as the only brand showing strong results in attracting cost-conscious customers.
CEO David Gibbs discussed the challenges facing the company during a second-quarter earnings call on Tuesday. He noted that temporary closures of Taco Bell stores in the Middle East, Malaysia, and Indonesia—due to the Israel-Hamas conflict—along with a more cautious spending behavior from consumers, have negatively impacted same-store sales.
Despite these issues, Taco Bell is outperforming its competitors in the fast food sector. “Taco Bell is really distinguishing itself from the competition,” Gibbs told investors.
As customers seek to make their money go further, Taco Bell’s 10-item value menu has proven successful. Gibbs highlighted this menu as a key factor in drawing price-sensitive customers. “These are unique items not offered by other chains and are not just smaller versions of existing items,” he said.
Yum Brands has introduced or reintroduced value deals across its major brands. KFC offers Taste of KFC deals and Pizza Hut has the $7 Deal Lovers. Taco Bell, known for its affordable options, features an extensive Cravings Value Menu.
Among these brands, only Taco Bell saw a growth in U.S. same-store sales during the second quarter of 2024, up by 5%. In contrast, KFC and Pizza Hut experienced a decline of 3% in same-store sales.
CFO Chris Turner reported that around 210 restaurants remain temporarily closed in the affected regions, impacting sales.
The earnings call also underscored the broader challenge in the fast food and fast casual sectors, with chains like McDonald’s, Starbucks, Burger King, and Wendy’s experiencing reduced foot traffic and sales, despite their efforts to introduce value meals.
Taco Bell’s recent Cantina Chicken lineup, launched in March, exceeded company expectations and contributed to a 7% increase in system sales. “Since the launch, Taco Bell’s chicken sales have risen significantly, with nearly 25% of orders including a Chicken Cantina item,” Gibbs said.
Additionally, Taco Bell reported growth in digital sales and successful implementation of new technologies. The company plans to expand its use of artificial intelligence in drive-thrus to hundreds of U.S. locations by year-end, a move where competitors have struggled. Lawrence Kim, chief innovation officer at Yum! Brands, expressed confidence in the company’s technological advancements.
Yum Brands reported second-quarter revenue of $1.76 billion, falling short of the $1.8 billion forecast.