Yum! Brands (Yum! Brands (YUM)) investors got a mixed bag Thursday, but they seemed to focus on the good stuff. The stock rose nearly 4% after the company reported second-quarter earnings that beat Wall Street's profit expectations, even if revenue came in a bit light.
Adjusted earnings landed at $1.62 per share, topping the analyst consensus of $1.58. Revenue hit $2.17 billion, just shy of the $2.20 billion analysts were looking for. Worldwide system sales grew 5% (stripping out currency effects), and the company added 1,053 new restaurants, a 5% increase in its footprint.
Digital sales are becoming a bigger part of the story, approaching $9 billion and accounting for more than 60% of system sales. KFC led the expansion charge with 660 new restaurants across 55 countries, while Pizza Hut opened 333 locations and Taco Bell added 54.
The Taco Bell Lettuce Saga
The big headline this quarter wasn't just the numbers—it was the cyclospora outbreak linked to lettuce from a Taco Bell vendor. The parasite caused a meaningful short-term sales hit, but CEO Chris Turner says the impact is temporary. Through July 27, Taco Bell's U.S. same-store sales were down 2% in the third quarter so far, according to CNBC.
CFO Ranjith Roy said the sharpest decline came during the weekend of July 18, right after the outbreak made national headlines. But Turner noted that sales have improved steadily over the past 10 days as customers realize the issue was industrywide, not just a Taco Bell problem. Roy added that average sales over the most recent four days had recovered about half of the initial drop.
Despite the outbreak, Taco Bell was still Yum!'s strongest brand in the second quarter, with same-store sales up 7%. Turner said social media sentiment has returned to pre-outbreak levels, and a $1 Mexican Pizza promotion drove record Tuesday app traffic, transactions, and loyalty sign-ups, Bloomberg reported.
Pizza Hut Gets a New Home
Yum! also announced it has signed definitive agreements to sell its Pizza Hut business to two buyers, wrapping up a strategic review. Turner said the company will become a more focused organization, prioritizing consumer relevance, restaurant economics, expanding its Byte by Yum! technology, and disciplined capital allocation.
Companywide, comparable sales grew 3%, matching analyst expectations. KFC posted 2% same-store sales growth. Looking ahead, Yum! reaffirmed its long-term targets of roughly 5% annual unit growth and 7% system sales growth (excluding currency), with a goal of at least 8% long-term core operating profit growth.
Shares were up 3.86% at $161.99 at the time of publication Thursday.
