Yum! Brands Inc. missed quarterly earnings estimates on Wednesday as increased costs of ingredients, labor and packaging material took a bite out of the Pizza Hut owner’s profits.
The restaurant group has been raising prices of tacos, fried chicken and pizzas but could not fully counter the blow from a 4% increase in overall expenses, as the war in Ukraine and persistent supply chain constraints have led to a surge in commodity prices.
Industry bellwethers McDonald’s Corp last month and Starbucks Corp on Tuesday topped quarterly earnings estimates, managing to offset increased expenses through price hikes.
Yum reported largely in-line quarterly same-store sales on strong demand for its tacos and relaunched Mexican pizza at Taco Bell.
The company said comparable sales rose 1%, with Taco Bell posting a better-than-expected 8% increase and making up for declines at KFC and Pizza Hut. Analysts had also estimated a near 1% increase.
Excluding one-off charges, Yum earned $1.05 per share for the second quarter ended June 30, compared with estimates of $1.09 per share, according to IBES data from Refinitiv.
Quarterly net income slumped 43% to $224 million, or 77 cents per share, as income tax provision increased over tenfold to $166 million. Yum also said a strong U.S. dollar shaved $23 million off its operating profit for the quarter.
Yum also reiterated it was in advanced stages of selling its KFC business in Russia to a local operator, who would rebrand the restaurants.
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