Yum Brands Q1 Earnings Show Digital Sales Surge Amid Broader Challenges

Yum Brands, the company behind Pizza Hut, KFC and Taco Bell, reported mixed results in its Q1 earnings announcement Wednesday (May 1) with challenges evident in its traditional sales channels, but a significant milestone in its digital growth strategy.

Despite a 3% decline in same-store sales worldwide, Yum Brands’ digital efforts reached new heights. The company reported that for the first time, digital transactions accounted for over 50% of its total sales, nearing $8 billion. The overall sales figures reflected a dip, particularly with Pizza Hut and KFC witnessing a 7% and 2% drop respectively, while Taco Bell saw a modest increase of 1%. This pattern underscores broader trends affecting the fast-food industry, including fluctuating consumer spending habits. The decrease in sales at Pizza Hut and KFC could be linked to a general reduction in discretionary spending, a sentiment echoed across the sector, including by peers like McDonald’s.

CEO David Gibbs acknowledged the anticipated pressure on same-store sales but expressed optimism about the company’s trajectory. “As expected, same-store sales were pressured this quarter, but we are encouraged by strong 2-year same-store sales growth and positive momentum exiting the quarter,” Gibbs said.

During the earnings call, Gibbs added some color to the digital announcement, revealing that digital sales reached a record 55% of total systemwide sales for the first quarter — a first where digital sales surpassed the 50% threshold. The company saw digital sales approach $8 billion, demonstrating an 11% increase year over year, and is now on a trajectory to hit $30 billion in annualized digital sales. Gibbs attributed this growth to the ongoing implementation of technology across its brands, increased consumer adoption of click-and-collect services and steady sales through third-party aggregators.

The digital increase is validation of a strategy undertaken by Yum Brands earlier this year. It spent $21 million on “digital, technology and innovation capabilities” in 2023, up from $11 million the previous year, The Wall Street Journal (WSJ) reported Monday (April 1).

One resource in which the company is investing is its mobile app for restaurant managers called SuperApp, according to the report. Yum Brands is now testing a generative artificial intelligence (AI) feature that answers employees’ questions, so they don’t have to turn to training materials or work through the interface of the app. The company is also looking to expand the app’s capabilities to help with ordering ingredients, scheduling shifts and training employees via augmented reality (AR), the report said.

In other tests, Yum Brands is experimenting with voice AI to take orders from customers in the drive-thru, image-recognition AI to count the cars waiting in the drive-thru and digital tools for managing kitchen appliances, per the report.

The Yum announcement continues a theme sounded by several companies during this earnings season that lower-income consumers are feeling the pinch of inflation. The data compiled by PYMNTS Intelligence indicates that splurging on non-essential items has contributed to financial distress, a situation cited by 24% of millennials and 34% of Generation Z consumers.