Yum! Brands (YUM) 1 May 242024 Q1 Earnings call transcript

Hello, everyone, and welcome to the Yum! Brands, Inc. 2024 First Quarter Earnings Call. My name is Nadia, and I'll be coordinating the call today. [Operator Instructions]. I will now hand over to your host, Matt Morris, Head of Investor Relations to begin. Matt, please go ahead.

operator. Thanks, and joining everyone, you thank morning, us. for Good David CEO; Russell, Chris our Senior call our our are today Controller. Corporate Dave On Turner, Gibbs, CFO; President and Vice our and

we'll from remarks call David Chris, Following open and to the questions.

should please events All Before future differ call date release includes subject are in with uncertainties be materially factors made and of results forward-looking this statements to that could considered from earnings that forward-looking we the with note this statements. our that of included statements only and cautionary statements the filings get the SEC. conjunction are actual call these started, and as to risk cause in our in our the

the In find addition, and call. relevant SEC with definitions our disclosures, other today's please non-GAAP to the filings metrics refer of to financial and reconciliations release sections of and on measures used our earnings

during results acquire we Ireland. and we closed all franchise that earnings transaction call, an system announced note impact call, in U.K. On restaurants XX. last KFC The on growth currency. to agreement the foreign exclude signed April sales today's our Please growth XXX that profit and operating of

units several KFC U.S. report reminder, Brands including Australia. and a of a basis, Yum! KFC and period calendar As U.K. on brands, business all Canada

forecasting fourth Leap When the week in growth business extra the For Day. those first year quarter basis, please additional owing units will for entities. that mind report benefit this from excludes to an of period same-store sales keep on the quarter include a day in sales XXXX,

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and demonstrating to grew Thank good of environment, X% core a operating the Matt, you, everyone. that I'm business. this resilience report quarter operating challenging our Yum! morning, despite profit pleased

communicated should challenging quarter inflationary normal and work this represent XQ return discrete last more we As a earnings, navigated most through as sales we ago pressures. year consumer our year tough demand to laps, environment

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delivered the same-store XXXX. margins, us outperformed while and U.S. growth unit openings KFC at XQ on a industry industry-leading sales up in unit Bell story set Taco for strong International

approaching make significant proprietary by digital excited click-and-collect year-over-year. billion trajectory up to sales continue XX% We continued to Digital represent one $X scaling an over are billion mix AI-powered and upward the sales, deployment. were largest deployment, platforms stable digital by points accelerate digital itself have and in in of continued Through plans and, represented of X companies QX. the kiosk in annualized sales, aggregator our would world. adoption and now progress We the and greater time of XX% ever, system third-party first $XX for sales which restaurant improved

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and our strategy. Unmatched and Bold Distinctive Good position. short, or Capabilities Growth Restaurant Culture Operating Easy I'll followed discuss Chris and balance Talent by provide for Now followed quarter our an Development, update our results, our then will Relevant, Unrivaled on brands, sheet first and R.E.D. by

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that, to With Chris, over you.

Thank morning, growth good balance discuss drivers, on you, Restaurant update results, our and Unmatched Operating and an sheet Today, David, strategy. capital our our and everyone. I'll Bold followed Capability financial by Development

Starting results. with our

unit X% sales driven X% system by by quarter grew First growth.

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proceeds. an on sheet expenditures $XX Net and in $XX Next, and capital refranchising update the $XX for CapEx were million, million I'll provide reflecting in position. our liquidity gross million quarter balance

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$XXX KFC Devyani the cash Our ended proceeds U.K. acquisition. accumulation to sale reflecting finance at million, in the modest cash investment balance and from

With the proceeds. KFC excluding U.K. Devyani deal a the will of $XXX to normalized behind million, us, our cash around return balance rate unrepatriated

cash fund maturities returning repurchases, excess to choose the investing investments maximizing to or by Thereafter, in will reiterate business, priorities capital significant in share our use competitive dividend includes with to XXXX, a we we offering excess free to resilient no value. plan guided accretive sheet, debt shareholder This our XXXX cash shareholders. absent flow and are a balance maintaining I make. primarily our that

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on Now outlook full let me discuss XXXX. our latest year

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full XX% range Bell be Taco margins We company-operated the year in expect to to XX%. of

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deliver excluding growth week. will we Finally, least operating profit confident XXrd X% of are the at we core benefit the

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through Going adaptable, choice forward, moving efficient the data-driven ourselves multi-brand more of we are a to as solidify organization. franchisor

of returns. of aspirations which sustained, We will and unlocking in early unmatched deliver power innings the are our only our the above-market value help data, shareholder

ready With that, any we are take operator, questions. to

[Operator to of first Tower question Instructions] goes Citigroup. Our Jon

was bit this could of there Encouraging flowing maybe the lower anticipate us you if help charges. there. give offsets drill for maybe But it were some to business. little move I puts term and the takes long the a of that over this you see G&A curve through to hoping line you moving context bending. quarter around and Obviously, with into the could where what's some curious some

point time, system-wide potentially continue you grow -- that you've we like move you reaching about idea one about feel of at a think target still time? to business in as that do X.X% over talked Or having digital is that can this further reasonable? or at I sales. even the think historically Is sit that you

Good Thanks, question. Jon. Yes.

of First, the G&A let couple on me just details reiterate guidance. a

So to we basis a be will ex that XX-week slightly G&A on flat expect down. special

As we a mentioned the call, compensation. of assumes on incentive last level target that

small of compensation go as onetime move and that incentive-based lapping could Examples levers event some overlap But cyber last that to through year. So Russia couple on of we year, include and at there factors of factors are achieve the us remnants play. one lapse last help that's that some the of first, the the year. that a factor plan

to some we the other the the in have on Now do the of related acquisition U.K. expenses stores side,

under But the set just ] million add will that are expect $XX best to our G&A in those [ We year. of factors.

pulling, to investments go of parts in that the business, we've the longer-term to strategy. of the used find has allowed which efficiencies us we program, legacy continue If resource we which part our D&T drive fund to we're in optimization to levers

saw special some going but included which quarter we this in business moves make, charges productivity helps of of You impact the those some drive forward. to that that the

franchisee And continue the bend finally, technology we the as through you our leverage we're we the curve to as on of scale allowing happens investments us And internally increased D&T continuing to digital more our impact how which deploy to say, and more adoption. across on is technology, the of of do This course, P&L. better and more operate our and business. in together we

technology that that plan. service, and more, a better, part David long-term faster, earlier, is the as in to our of said of safer curve All delivering business, cheaper but bending is

of Bittner Oppenheimer Co. question Brian to next & goes The

algorithm the the profit profit in at goals. plan a your to rest case base lot and because the flexibility grow is of comparisons, full the core global long-term always reiterated target for operating your outlook. with was operating I And was quarter given comfortably question you sales the to of year growth and in reach tough operating XXXX of built the hit X%. the operating have required core profit And what's your targets. profit But G&A that I'm comps assuming same-store this year were you're negative where thinking first impressive realize least You line to is your below the that's of

it proud of Brian, result. question, talent our And and our the ability in this to our environment, and to agree. model resilience the of of kind I that business the X% Appreciate a of Hitting think we're I expect choppy leaders. speaks

than to Obviously, you preparing particularly can number place that much in -- world, number. development we the we as to to sales this is count like provide an so front. partners pull difficult of the on the obviously, far to environment guidance, X%. in our on seeing. more don't to And growth various We're because sales good we're for in to the around forecasting of have the to and one pipeline about this. get the given levers we environment, one in lever have feel as As the that's strong we scenarios know, the the impact sales same-store development really something from But it's same-store get we quarter-to-quarter very that same-store X% get

next Palmer The question of goes David ISI. to Evercore

of just months or was about any versus color feeling these brand curious better on How trends the brand for some more rates a ago? your changed the worse? reality for international, of and XXXX hoping were exit are Has in few same-store the given to I'm on geography combinations. highlights of you about things What perhaps International. lowlights just Pizza combinations? sales get International, Hut I of some more KFC your geography terms And importantly,

feel system business, growth, XX% world impacted by if twin like of example, release, the less trip XX% I David. XX%. sorry, are in International. was up this Latin recently made -- international actually Africa, XX%. look really no up up XX%; our our impact, impacted, we Africa America, up the East, to of quarter less from Taco Latin I'm Thanks, our our to right? America, a question, Bell about in industry, where our profit there, we're leader margin from terms we're of we're on you'll with our progress in away and the leadership. of Yes. KFC areas In Look, and U.S. our XX% comes KFC engines your profit for the Middle at Africa, sales, the you that International. the And see great blown the ground just and of making that widening team by the was

there, Africa, way we've around the franchisees who's got innovation in we South part that breakfast, our leveraging some of where right the building brand Whether of choice Kenya take our used the the company's our to menu launching it's be innovation employer system, world. inspiring country, visited, the which -- actually of or to and

real places the look if business doing at and that, you is So healthy like well.

the world growth. growing of are that's obviously system of The this East, you system see environment. But sales more still adjust in International impressive the we Middle impacted for challenged. sales parts X% other -- kind KFC And X% if X%, for results much

very the that the the far know for this strength bodes the And to unit the That's consumer in we probably that up same release, as one new But growth more past International than navigate. highlighted we equipped XX% development quality KFC, quarters. importantly, goes, seeing we're in well U.S. the with with pipeline well the of has the we future on have, which KFC of earnings obviously of value international shows of an there brand. We're in been as it's emphasis thing net the

question of to John Ivankoe next JPMorgan. The goes

hoping of as bending in was to has this growth. total curve it kind Or just debated we the dollars rate a in Street platform? -- the leverage 'XX on G&A little think 'XX might are growth? see talking this of and more declines the of -- lower actually as on of been 'XX bit how might and topics color I we of about a on digital I type especially get one 'XX more influence and the spend, just I technology maybe mean, you

course, at something is acquiring of with technology and think of this, be technology end, kind to talent, one I best-of-class the it's maintaining But leadership And very technology technology, follow-up especially related, building might the different. thing.

talent this future. may to and and both to the in your going tech So on work I get as this ability acquiring thoughts in retain to just forward talent some projects have Yum!'s of terms wanted other attract of they

Experiences, behalf we to few you technology years, saw Thanks, back put Look, capabilities Operations those on invested and Easy that did it was if Yum's! as the to we go pressure place for the and to the the we in digital G&A importance create John. of it. last future line thought the Easy of and do across system right the and business, We on thing build Easy and over some Insights. did ahead them

and consumers happens the and the of our in life that way economics we their more As when improvements to our the to their we markets deploy and and technology impacts get platforms course, and business members. the cases see increased their adoption, franchisees more team coming

continuing to call, deployments. the drive on shared those we as we're, And

management both for we're system. at In starting to Dragontail back-of-house to KFC Poseidon with fact, be the those now kitchen Taco some display instance, deploying we deployments. Trax AIM U.S. system driving along At bundle the We'll addition Bell, system the are of the POS in inventory

together. And is to more create talk the we're points to prove and as it our those technology we additional in impact, proof easier delivering. of that case and examples becomes more markets, the So bundling as business we franchisees

move So long-term path supports forward. as the deployment we that's what

and Obviously, have. to said, time. P&L we leveraging continuing impact as enhance in make that investments reduces But in platforms the that you David data, like bend our as over as AI, existing to to things we the the mentioned, net have continue better we curve,

a to run, expect leverage as long the and long percent the system of over sales G&A our us we G&A should in so And down get the increasing on run. come

The next question Stanley. goes of to Morgan Brian Harbour

following that. up Maybe just on

spent discussing lot these all time of You a of initiatives. tech

deployed in restaurants of it terms that for tech would Obviously, profitability. or you happens examples that to when bundle I us franchisee think life example, certain mentioned? sort kind of, a that deploy bring there for impact. to in and what think uplift harder of impact, you franchisee observe us. little was give in sort can that margin e-commerce you just saw it's certain just those But of any to are comp I you see we don't bit probably of a sales more profits, for

course, these all to they partnering case. strong when in businesses is Look, and of see platforms that do of these their only business with they a they question. and, bring deployments, us Great this franchisees Yes. co-invest our to

in into take frequency. results of platforms combination, the most U.S., platforms. combination around sales I Bell size, there every tremendous as of those market think gone the we check we essentially the now the in nondigital increases deploy as from our channels, power XX% market if is in So the we sales in shift demonstrates from increases the no digital In sales where mix they've see which to XXXX Taco the well of one to we you globe, see digital

the momentum of to their the part Now digital But franchisees' set on best technology think our on see and proof our That's globe, records us development development that economics. digital continuing don't as our of around on is of the an unit side all franchisees, and that. you important is you unit to adding for the point is impacts said, driver I the P&L P&Ls. productivity

we the these So But all capabilities. platforms from as getting started model. on business enhancing is that we're just of said, we think and potential value the creation

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Geiger of The next question goes to UBS. Dennis

and weather how to trajectory of could you sort U.S., tougher at brands the if some more those the it's if the level. Specific behind of comparisons wondering speak even a I'm a bit higher about you, of think to the headwinds you with

like do it strategy environment otherwise? sort whether guys environment any about notable maybe and the a how this, of are you sort in there's contemplate difficult how shifts brands And of be positioned or value think seemingly on in that in you an U.S. the

Yes. Thanks, Dennis.

but so the we during in weather this quarter. of -- completeness, think I'll to by for I just lot we the referred somewhere a had obviously impact QX,

XX% U.S. seeing into an improved Taco quarter. And throughout Our the as business Bell, during Bell we trends. QX, know, Taco are growth improved our is of profit. operating sales the you quarter. sequentially generally acceleration same-store of

So we're Remember, Cantina menu QX. is positioned. just the at the about Chicken they how of end good Bell feeling Taco launched

it's excited consumers. been say, by of well share we're that. to received to results But suffice So the

would the with think from a we care what U.S.. more And for more I and data positioned know others Customers struggling is is more industry describe leader. Taco Taco value as value today. well the Bell normal about Taco consumer Bell value a in we is environment are value that incredibly that Bell, that important and

Taco You're in not fall We're industry. that low-income consumers Bell. at off seeing some the seeing

about setup probably Bell, environment favorable brand. Taco they operate really you a in strength So say any can which the that the for of given

see the Pizza did in Pizza we didn't quarter anything in for positive in with versus to actually sales. we But QX balance Pizza U.S. lapse the do And on X-year calendar that and as year Hut, QX. obviously, large. We X-year that at the Hut Hut's are of Hut unusually intend positive basis were trends lap excited a Pizza the acceleration We U.S. of has for an the I'm well about the always

some on really been I U.S. reset about of brand we're struggling. it's behind KFC that's the think The boldly the KFC, excited brand story. the scenes different And to For has U.S. work the going a the in in

playbook job the the of is move our on [ to that U.S. we before, the have our operating great about which a priority KFC, underlying fire Obviously, It's profit. something as business. brand business a of that's growth that needle for world, do as the business, a in how us have is it international better move and consumers equation, global connect for to but ], our high Yum! life bring doesn't the with to small is we talked We in forward. it I know We around part to really a

Bank The of question next goes of to America. Sara Senatore

question. and a follow-up then quick a First,

impact just brand you're time doing about type was Just I question curious and of specific dissipating. thing, anything time? The of said beyond. sort over this into is East, of was just marketing, matter unit translates do growth that the if it year that maybe or that if sales it's and you about Middle system-wide to from like the a how

the time? from as of about should long-term we As hitting think some top about AUVs algorithm your a over of you year kind coming or how in line these think lower are that long-term this either algorithm, perspective

Sara. you, Thank Sure.

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goes David The next to question of Tarantino Baird.

results performance. on in context your sales of is question the the My

expected, how was I guess, you QX profit that QX you you the then relative better you what might when curious in than in you to to gave I slightly was And particular, originally. had expectations the expected? was progressing your have sales the what the know operating expectations. better I are than about guidance mentioned think

the then And whether you could of or positive us second secondly, some the sight have line David, comps sense performance either of quarter second year? half the of in you to give turning in global if

example, QX. we Obviously, the David. didn't U.S., in Thanks, in for weather anticipate the impacts

to But as tad QX, we weaker. up perhaps picking the of Bell in go what mentioned a So line is your as point generally the just into we expected, Taco with I it earlier, strength. question, business was

it's commitment our it out and We the year, we are feel pace and comfortable team the the there seeing. these years, And for of one be with well. always a in of development development great tackling with that with as why year, grab We're to But have long-term operating challenges. challenging projections is on is track algorithm. our the opportunity through we market challenging doing generally a to share profit any that which an you're going

close the how this this but I really that a around that here in up we're have few how talent we to about about we this fact this lot, The that a quarter a thrown resilient that testament the quarter way. just I'll operating And in was sitting just able to about put is demonstrated we're can target, think environment first talk reconfirm growth is a have profit business X% and We comments X% business. and levers think, with choppy the to world. navigate and anything the I pull this core we our and plus

Bell's U.S. of operating Taco or underlying consumers Taco value when Bell KFC plus their performance is XQ. a of in at the our International, their obvious and profit, the XX% in you at strength at XX% business and environment seeing growth acceleration you we're are which engines unit with look growth twin low-income look Our KFC

for Our to target. put history, or development up development quarter that we meet second actually just the exceed obviously track highest Yum's! machine, development gross in X% on

of as was point. all of It's a of that the quickly. years to don't separate And use think ourselves a put key digital this thought accomplishment the you digital can resting teams just from XX% people AI as at data then together. our we very that we to exciting, rest on is on things ago are from not as and a the Passing see And the something our we in real quality testament few industry. inflection I the possible lean remarks, the prepared like

in are how fact how one That's and all other base which really the Since which that final what the XXXX, we strength terms business. of any the our down that a out in strengthen of get operating our is. in And we of we're choppy year, through I January time the the Think profit XX% asset the Yum! X% January come don't and it, to environment 'XX, how confident our consumer have has modern I'll slowing impact on our base business been delivering of Since this and has been fast soon. that that, very store at day we're fresh of new leave world just XX% growth. That's the you goes We about see units can of it developing. are. built. brands core heard with core that of built. our

Thank you for your time today.

joining. you you. now today's for Thank concludes Thank call. all This

lines. You now disconnect your may