U.S. sales at Yum Brands restaurant chains not named Taco Bell worsened in the second quarter as a difficult consumer environment appeared to take a big bite out of KFC and Pizza Hut.
Same-store sales at KFC declined 5% in the U.S. in the second quarter, Yum Brands said on Tuesday. Pizza Hut also reported a 5% decline in the key metric. At the fast-casual burger chain Habit Burger & Grill, same-store sales declined 4%.
At Taco Bell, on the other hand, same-store sales grew 4%. That was four percentage points better than the industry average in the quarter, though that was a slowdown from the 9% same-store sales growth in the first quarter.
Taco Bell represents 82% of Yum’s U.S. profit.
“This is a softer consumer environment all around the world where value matters,” David Gibbs, CEO of the Louisville, Kentucky-based Yum, told analysts on Tuesday.
Gibbs said that KFC’s “challenges stem from gaps in value perception” and noted that “innovation had not fully resonated with consumers.”
But he noted that the company recently announced a “Kentucky Fried Comeback” with more “innovative and relevant products” designed to gain consumer enthusiasm. But KFC is also planning to open more locations of its chicken tenders concept Saucy in Orlando later this year.
Gibbs also blamed value on Pizza Hut’s challenges in the second quarter, noting that an “insufficient value message and a competitive value landscape led to transaction softness” in the quarter.
Yum executives blamed weakness at Habit on a soft consumer landscape but they did say that sales improved in June with new marketing. The company plans more marketing in the coming months to continue building on that momentum.
Yum stock was down nearly 3% in morning trading on Tuesday.
Digital sales now represent 57% of Yum Brands sales, up seven percentage points compared with a year ago, executives said. Revenues at Yum grew 10% to $1.9 billion. Net income rose 2% to $374 million, or $1.33 per share.
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