Taco Bell parent Yum Brands sales fall as weak US demand lingers

(Reuters) – Yum Brands reported a bigger-than-expected fall in same-store sales for the second quarter as sticky inflation discouraged lower-income Americans from spending on dining out.

Like its peers in the fast-food industry, the Taco Bell parent has been investing in loyalty programs and refreshing its menus in an attempt to appeal to budget-conscious consumers.

However, stiff competition for value meals and promotions has dogged Yum’s KFC business in the United States this year, with consumers increasingly preferring to cook more affordable meals at home.

Same-store sales at the company’s KFC division fell 5% in the United States in the second quarter, compared with a 7% decline in the prior quarter.

Weakness in sales this quarter at Yum echoes results from other restaurant majors such as Domino’s, McDonald’s (NYSE:) and Starbucks (NASDAQ:).

Fast-food companies were engaged in a “value war” this quarter, offering some popular items at a discount in a bid to offset steep menu-price rises in the U.S. over the last two years.

The consumer price index for food away from home increased 4.1% between June 2023 and June 2024, up from 4% growth in May, according to data from the National Restaurant Association.

“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,” said Yum CEO David Gibbs in a statement.

Fresh menu items such as the Cantina Chicken and the popular Taco Tuesday promotional event helped drive growth in comparable sales at Yum’s key Taco Bell division to 5%, ahead of expectations of 3.6%, according to LSEG data.

This helped Yum narrow its quarterly overall same-store sales decline to 1%, from 3% in the preceding quarter. However, this was wider than market expectations for a decline of 0.2%.