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Yum Brands disappoints as Middle East conflict weighs on sales growth

Artur Widak | Nurphoto | Getty Images

KFC and Taco Bell restaurants along 118th Avenue in Edmonton, on January 21, 2024, in Edmonton, Alberta, Canada.

  • Yum Brands on Wednesday reported quarterly earnings and revenue that missed analysts' expectations as KFC, Taco Bell and Pizza Hut all posted weaker-than-expected sales.
  • Yum is the third global restaurant giant to report disappointing revenue for the last three months of 2023 after Starbucks and McDonald's both missed Wall Street's expectations.

Yum Brands on Wednesday reported quarterly earnings and revenue that missed analysts' expectations, noting the Israel-Hamas war hurt its sales.

Yum is the third global restaurant giant to report disappointing revenue for the last three months of 2023. Starbucks and McDonald's both missed Wall Street's expectations, also citing the Israel-Hamas war among their head winds.

"During the quarter, topline sales were impacted by the conflict in the Middle East region with varying degrees of impact across markets in the Middle East and Malaysia and Indonesia," Yum CEO David Gibbs told analysts on the company's conference call. "This represented a low-single-digit headwind to Yum's overall sales growth."

Gibbs added that the sales trends continued into the first quarter and will likely taper off throughout the year.

Yum's stock rose almost 2% Wednesday.

Here's what Yum Brands reported compared with what Wall Street was expecting, based on a survey of analysts by LSEG, formerly known as Refinitiv:

  • Earnings per share: $1.26 adjusted vs. $1.40 expected
  • Revenue: $2.04 billion vs. $2.11 billion expected

Yum reported fourth-quarter net income of $463 million, or $1.62 per share, up from $371 million, or $1.29 per share, a year earlier.

Excluding items, the restaurant giant earned $1.26 cents per share. The company said its quarterly tax rate fluctuated, dragging its earnings down by 23 cents per share.

Net sales rose 1% to $2.04 billion. The company's global same-store sales increased 1% as well.

Pizza Hut reported same-store sales declines of 2%, missing expectations of 0.6% growth. The pizza chain's U.S. same-store sales shrank 4%, while its international same-store sales were flat.

Pizza Hut, in particular, saw its sales soften in some markets as a result of the Israel-Hamas war, the company said. Some activists called for a boycott of the pizza chain after Pizza Hut's Israeli franchisee posted an Instagram story implying it gave free pizza to Israeli soldiers.

KFC's same-store sales rose 2%, coming in below StreetAccount estimates of 4.7%. In the first quarter, KFC's U.S. team plans to launch the smashed potato bowl and the chain's first loyalty program to revive sales.

Even Taco Bell, usually the gem of Yum's portfolio, underperformed Wall Street's expectations. The Mexican-inspired chain reported same-store sales growth of 3%, missing StreetAccount estimates of 3.8%. A year earlier, the chain reported same-store sales growth of 11%, fueled by the permanent return of its cult-favorite Mexican Pizza.

In 2024, Yum plans to pass several major milestones for its global footprint. Yum will surpass 60,000 locations, Gibbs said in a statement, including a KFC footprint of more than 30,000 restaurants and a Pizza Hut tally of beyond 20,000.

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