Yum Brands' sales rose last quarter, thanks to Taco Bell

During the second quarter, Taco Bell was the workhorse for Yum Brands yet again, turning in a 7% same-store sales increase. On Yum’s earnings call Thursday, CEO Chris Turner said Taco Bell “entered Q3 in its strongest position ever.”

But those results were before the July cyclospora outbreak that has since sickened thousands and hospitalized hundreds and that has disproportionately impacted the quick-service chain amid early reports that its lettuce supplied by Taylor Farms was a source. Executives said same-store sales so far this quarter are down 2%, though they noted declines have “moderated materially.”

Overall, Yum’s global same-store sales rose 3% in the second quarter, with KFC up 2% and Pizza Hut down 1%. The Habit Burger & Grill Division's same-store sales were up 3% for the quarter.

Meanwhile, system sales grew 5% for the period, with KFC up 6% and Taco Bell up 9% to more than offset Pizza Hut’s -2%.

Yum Brands also reported that its digital sales are nearly $9 billion, while its digital mix, excluding Pizza Hut, exceeded 60%.

Unit growth was up 5% for the quarter, including 1,053 gross new units. And, Yum’s core operating profit increased 5%, again led by Taco Bell. Excluding Pizza Hut, which entered into agreements with LongRange Capital and Yum China in June to be sold, core operating profit grew 8%.

In a statement, CEO Chris Turner said Yum will move forward without Pizza Hut as a “more focused organization positioned to accelerate growth.”

“As we continue to raise the bar, our priorities are to deepen consumer relevance, improve restaurant economics, bring the benefits of Byte by Yum! to more of our system and allocate capital in a way that creates sustained shareholder value,” he added.

Turner took over as CEO last year, following David Gibbs’ retirement. He then put a growth strategy into place called "Raising the B.A.R.," which focuses on:

• Battling for the future consumer

• Accelerating restaurant economics

• Reaching the full potential of the company's restaurant digital and technology platform, Byte by Yum

KFC recently unveiled its “next chapter” initiative aimed at “battling for the future consumer,” including restaurant modernization and menu innovations such as new tenders, sauces, and beverages. The chain expects to have core elements of this strategy across its top 20 markets by the end of 2027.

Taco Bell, which represents 43% of Yum’s operating profit, benefited from strong digital sales during Q2, reaching 47% of the mix. Turner said the chain’s pre-cyclospora momentum came from providing compelling value, innovation that has broadened occasions, and “cultural relevance.”

Meanwhile, Yum expects both Pizza Hut transactions to close in August. At that time, the company will provide some transition services to the chain, outside of China, including enterprise technology and finance, with the majority of those services to be phased out over the course of 2027. Yum expects to receive $2.5 million in transition services-related fees per month, which the company said will fully offset its general and administrative expenses previously allocated to the business.

Further, Byte by Yum, the company’s AI-powered platform launched last year, will continue to be used by Pizza Hut, excluding China, under a separate commercial agreement separate from transition services.

“The Pizza Hut transaction is on track (and) will position Pizza Hut for greater success in the future,” Turner said. “And, it will position Yum for greater success in the future because of the focus we’ll be able to put on our three remaining brands.”