In This Story
As pesky inflation keeps cash-strapped consumers from dining out, Taco Bell is giving Yum! Brands a modest sales boost — even as KFC and Pizza Hut stagger.
Yum! Brands posted lower-than-expected sales for the second quarter on Tuesday. That slowdown was in part due to U.S. consumers keeping their their wallets closed — and impacts from the Middle East conflict. The sales decline didn’t keep Yum! Brands’ shares from slightly rising Tuesday.
“Taco Bell is a clear standout in today’s environment, not only achieving same-store sales growth well ahead of the QSR category, but delivering restaurant-level margins near a record high,” David Gibbs, Yum! Brands’ chief executive officer, told investors during the earnings call.
Gibbs said that sales at Taco Bell grew “across all income cohorts,” and despite fast food prices being higher across the industry, fresh menu items like the Cantina Chicken and the chain’s popular Taco Tuesday promotion are still capturing the attention of consumers.
Fast food competition is hot and ready
Like its peers, the Taco Bell parent company has been investing in loyalty programs and re-upping its menu offerings in an attempt to lure consumers. In Taco Bell’s case, the Tex Mex chain is offering a bunch of deals, including its $7 Luxe Cravings Box, on top of its Baja Blast-flavored gelato (pie of the same flavor is coming later this year). It’s also getting into AI (at least for its drive-thrus).
But the competition is stiff. McDonald’s is extending its $5 meal deal, despite it posting a decline in sales. It also has a new big burger it’s testing out dubbed the Big Arch. Burger King has its own $5 “Your Way” bundle, as does Wendy’s with its $5 Biggie Bag. Not to mention that the $3 breakfast bundle at Wendy’s has gotten so popular the chain said last week it was investing millions of dollars so that it could keep the promotion through 2025. That’s not even all the deals. Sonic has a $1.99 permanent menu fixture, Dairy Queen has a $7 meal deal, and meat sandwich maker Arby’s has a $9 stack (that includes a shake).
Shake Shack, however, doesn’t plan on adding a bundle promotion (it says customers care about quality, not necessarily quantity). Nor does Chipotle, saying that sales are up even as its faces pushback for its self-proclaimed “generous” portion sizes.
But even with the frenzy of fast food options, consumers don’t appear to be too hooked on KFC’s chicken offerings, nor Pizza Hut’s pizza pies. During the second quarter, KFC and Pizza Hut both reported a 3% decline in sales. Other popular chains like Dominos, Starbucks, and McDonald’s have also been dealing with waning demand, especially from international consumers.
Yum! Brands slightly missed Wall Street’s revenue expectations. During the second quarter, it posted revenue of $1.76 billion. The Street forecasted that it would report $1.8 billion.