Yum Brands (YUM) Q1 2023 earnings

Yum Brands on Wednesday reported quarterly earnings that fell short of analysts’ expectations, despite a China sales rebound for KFC and Pizza Hut.

Yum joins the growing list of companies that includes Procter & Gamble and Starbucks that have reported recovering sales in China.

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Shares of the company dropped more than 2% in premarket trading.

Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

• Earnings per share: $1.06 adjusted vs. $1.13 expected
• Revenue: $1.65 billion vs. $1.62 billion expected

Yum reported first-quarter net income of $300 million, or $1.05 per share, down from $399 million, or $1.36 per share, a year earlier. The company said its earning per share decreased by 7 cents per share due to decreases in the value of unnamed investments, and took an 8 cent per share hit because of foreign currency.

Excluding items, the restaurant company earned $1.06 per share.

Net sales rose 6% to $1.65 billion. Its same-store sales increased 8% in the quarter as its three largest chains outperformed expectations. Digital sales exceeded 45% of transactions, CEO David Gibbs said.

KFC’s same-store sales rose 9%, thanks to its international markets. In China, KFC’s largest market, system sales climbed 17%, helping lift the chain’s international same-store sales growth 11%.

Similarly, Pizza Hut reported that China’s system sales soared 24% in the quarter. The country is Pizza Hut’s second-largest market, trailing on the U.S.

The pizza chain also performed well stateside, reporting domestic same-store sales growth of 8%. Overall, Pizza Hut’s same-store sales rose 7%.

Taco Bell reported same-store sales growth of 8% for the quarter.

Yum opened 746 new locations during the quarter. Taco Bell saw the largest increase in openings as the chain focused on expanding its international footprint.

Shortly after the quarter ended, Yum completed its exit from Russia through the sale of those KFC restaurants to Smart Service, an existing Russian franchisee. The company had already sold its Pizza Hut locations there to a local operator last summer following Moscow’s invasion of Ukraine.

Next quarter, Yum won’t face any comparisons that include its Russian business because the company suspended operations there in early March last year.