Yum!(YUM) - 2024 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Yum! Brands reported a 6% growth in core operating profit for Q1 2024, despite a challenging operating environment [7][25] - System sales grew by 2% driven by 6% unit growth, with same-store sales impacted by prior year comparisons and external factors [25][26] - First quarter ex-special EPS was $1.15, reflecting negative impacts from investment losses and foreign currency translation [26] Business Line Data and Key Metrics Changes - KFC division, accounting for 51% of divisional operating profit, saw system sales grow by 4% due to 8% unit growth, but same-store sales declined by 2% [9][10] - Taco Bell U.S. system sales grew by 4%, with same-store sales up by 2%, following a strong previous year [11][12] - Pizza Hut division experienced a 4% decline in system sales, with a 7% decline in same-store sales [13][14] Market Data and Key Metrics Changes - Latin America reported a 22% growth in system sales, while Africa saw an 11% increase, indicating strong performance in these regions [9][10] - KFC International's system sales grew by 6%, with a notable 26% growth in same-store sales in Korea [10][51] Company Strategy and Development Direction - The company is focused on its Good Growth strategy, emphasizing digital and technology advancements to enhance franchisee support and consumer experience [15][20] - Yum! Brands aims to achieve at least 8% core operating profit growth for the full year, leveraging unit development and digital sales [8][40] - The company is committed to expanding its digital platforms, with over 50% of sales now coming from digital channels [17][20] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by the Middle East conflict but noted improvements in the most affected markets [7][8] - The company is optimistic about Taco Bell's positioning in the U.S. market, highlighting its value leadership amid changing consumer preferences [61][62] - Management expressed confidence in achieving strong unit development and maintaining a resilient business model despite external pressures [41][40] Other Important Information - The acquisition of 218 KFC franchise restaurants in the UK and Ireland was completed, expected to add approximately$ 40 million in EBITDA over the next year [27] - The company is enhancing its technology capabilities, with over 40 AI initiatives in progress across various functions [20][21] Q&A Session Summary Question: Insights on G&A expenses and long-term targets - Management expects ex-special G&A to be flat to slightly down, with ongoing resource optimization efforts contributing to efficiency [44][45] Question: Global same-store sales expectations for 2024 - Management is preparing for various scenarios to achieve the 8% core operating profit target, emphasizing development over same-store sales [48] Question: Highlights of KFC and Pizza Hut International performance - KFC International reported strong growth in regions less impacted by external conflicts, while Pizza Hut faced challenges but showed positive trends in certain markets [51] Question: Digital and technology spend impact on G&A growth - Management anticipates increasing leverage on G&A as technology adoption grows, aiming for a reduction in G&A as a percentage of system sales over the long term [54] Question: U.S. brand positioning and strategy shifts - Taco Bell is well-positioned for growth, while KFC in the U.S. is undergoing a brand reset to improve its market presence [61][62] Question: Sales performance relative to expectations - Q1 sales were generally in line with expectations, with Taco Bell showing signs of strength moving into Q2 [68]