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LOUISVILLE, KY. — A strong recovery in China and the launch of chicken nuggets in the United States were among factors contributing to double-digit sales growth at KFC in the recent quarter. Meanwhile, at Taco Bell, a global Taco Tuesday marketing campaign in partnership with professional basketball player LeBron James “created massive brand buzz,” said David W. Gibbs, chief executive officer of parent company Yum! Brands, Inc.
The business also benefited from the addition of 1,025 new restaurants during the three-month period.
“For the second quarter, we delivered same-store sales growth of 9% and unit growth of 6%, with KFC setting the pace with a remarkable 19% system sales growth on the foundation of our industry-leading development momentum, distinctive marketing campaigns and relevant new product layers such as the launch of original recipe hand-breaded chicken nuggets here in the US,” Mr. Gibbs said during an Aug. 2 earnings call.
Net income for the second quarter ended June 30 increased 86% to $418 million, equal to $1.49 per share on the common stock, from $224 million, or 78¢ per share, in the prior-year period. Excluding special items, net income was $403 million, up 31% from $307 million.
Total revenues rose 3% to $1.69 billion from $1.64 billion.
“Our distinctive digital capabilities, which enable easier experiences and greater access to our iconic brands, continues to unlock incremental sales through higher spend and frequency as well as incremental profitability for our system,” Mr. Gibbs said. “On that note, I’m pleased to report another quarter of double-digit growth, resulting in $7 billion in digital sales, representing over 45% of our global system sales.”
KFC division operating profit increased 11% to $326 million from $293 million the year before. System sales advanced 14% to $8.3 billion from $7.3 billion. Same-store sales were up 13% from the year-ago quarter.
“Second-quarter system-sales growth of 19% (in constant currency) was driven by 13% same-store sales growth and 7% unit growth,” Mr. Gibbs said. “Widespread transaction growth and a strong recovery in our China market … powered our same-store sales growth. However, even outside of China, KFC Global same-store sales growth was up an impressive 10% in the quarter. KFC represents our largest digital business globally on a dollar basis and showed continued momentum with strong year-over-year growth in both digital sales and mix.”
Taco Bell division operating profit of $228 million was up 6% from $215 million last year. System sales grew 7% to $3.8 billion from $3.5 billion. Taco Bell US system sales grew 6%, and Taco Bell International system sales excluding foreign currency increased 18%. Taco Bell US same-store sales grew 4%.
“In the US, digital sales increased almost 35% year-over-year, with kiosks now deployed in 100% of Taco Bell stores,” Mr. Gibbs said. “For Taco Bell International, system sales grew 18% driven by development momentum. The global Taco Tuesday campaign, which launched in June and will continue through the third quarter, leverages Taco Bell’s US cultural leadership, building brand equity and consumer awareness with a consistent look and feel around the world.”
Pizza Hut division operating profit declined 2% to $91 million from $93 million. System sales grew 5% to $3.2 million from $3 million. Pizza Hut US grew system sales 2%, driven by 1% same-store sales growth.
“Pizza Hut International grew system sales 11%, led by 6% same-store sales growth and 5% unit growth,” Mr. Gibbs said. “The individual occasion continued to be a growth driver largely on incremental transaction growth from the Melts platform, which in the US has proven to be a self-sustaining layer at an attractive entry price point. Since launching in the US late last year, Melts has now reached 35 markets, up significantly from the 11 markets in the first quarter now in over half of our global store base.”
The Habit Burger Grill division system sales grew 9% with flat same-store sales growth.
“The Habit team continues to lean into its menu strategy of culinary forward limited-time offerings, highlighting its craft brand positioning through their elevated craveable offerings,” Mr. Gibbs said. “We continue to expand access points for our customers with the rollout of kiosks now in over 60% of stores. On average kiosk sales see 10% higher checks compared with front counter sales and excellent profit flow-through, yet another proof point of the value from converting to digital sales.”
Yum! Brands and its subsidiaries franchise or operate more than 56,000 restaurants in more than 155 countries and territories.
“Just in the last 2.5 years, we have added 10,000 new gross units to the Yum! system,” Mr. Gibbs said. “That’s nearly 20% of our stores were built in the last 2.5 years.”
Year-to-date net income of $718 million, equal to $2.55 per share, was up 15% from $623 million, or $2.16 per share, in the comparable period. Total revenues for the first six months of the year grew 5% to $3.3 billion from $3.2 billion.
“Given our strong first-half results and continuing momentum into the second half of the year, I’m happy to report that we expect on a full-year basis to over deliver on all components of our long-term growth algorithm,” said Christopher L. Turner, chief financial officer. “We expect full-year 2023 core operating profit to grow low double digits, which is ahead of our long-term guidance of at least 8%.”
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