System Sales Growth: First quarter system sales grew by 2%, driven by a robust 6% unit growth.
Core Operating Profit: YUM! Brands reported a core operating profit increase of 6% for the quarter, surpassing internal expectations despite a challenging environment.
Digital Sales: Digital sales continued to ascend, reaching nearly $8 billion, marking an 11% year-over-year increase.
General and Administrative Expenses: First quarter expenses were $265 million, down 4% year-over-year, with reported G&A at $286 million including $21 million in special expenses.
Earnings Per Share (EPS): Excluding special items, Q1 EPS stood at $1.15, factoring in negative impacts from investment losses and foreign currency translation.
Future Guidance
Annual Core Operating Profit Growth: YUM! remains committed to achieving its long-term growth algorithm target of at least 8% core operating profit growth for the full year.
Unit Growth: Over 800 units were opened in Q1, with expectations to cross the 60,000 unit milestone in 2024, underscoring confidence in ongoing expansion.
Expected Incremental EBITDA: The acquisition of 218 KFC U.K. and Ireland stores is anticipated to provide approximately $40 million of incremental EBITDA in the 12 months following the acquisition.
Capital Expenditures: Q1 net capital expenditures amounted to $38 million, with gross CapEx at $49 million offset by $11 million in refranchising proceeds.
Trends, Market Conditions, Sentiment
Digital and AI Initiatives: A significant focus on expanding digital and AI-powered platforms, with digital sales now representing over 50% of system sales, underlining YUM!‘s transition into a leading global digital restaurant company.
Market Resilience: Despite the challenges posed by prior year comparisons and the conflict in the Middle East, YUM!‘s diverse portfolio of brands and innovative strategies have demonstrated resilience and adaptability in a fluctuating market environment.
Development Optimism: The confidence in unit growth and franchise development, supported by a strong pipeline and the large, untapped market potential, highlights optimism for global expansion and market penetration.
Operational Efficiency: Investments in technology and digital platforms, along with efforts in operational excellence, are poised to enhance customer experience and optimize cost structures across the board.
Impact of External Factors: External pressures such as the conflict in the Middle East and inflationary environments have challenged, but not derailed, growth trajectories, reflecting YUM!‘s robust business model and strategic agility.
Notable Quotes
”I’m pleased to report that Yum! grew core operating profit 6% this quarter despite a challenging operating environment, demonstrating the resilience of our business.” - David Gibbs, CEO
”Digital sales continued an upward trajectory approaching $8 billion and were up 11% year-over-year.” - David Gibbs, CEO
”We expect to continue to open units in a broad range of markets…and to cross the 60,000 unit milestone.” - Christopher Turner, CFO
”We are excited about having ramped up this second phase in our journey and are doubling down and pursuing the ultimate goal of our digital and technology strategy…while simultaneously delighting consumers and maximizing Yum! shareholders’ returns.” - David Gibbs, CEO
