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Tag: Yum! Brands Inc

  • Yum Brands falls short on revenue as Pizza Hut and KFC same-store sales fall

    Yum Brands falls short on revenue as Pizza Hut and KFC same-store sales fall

    A sign is posted in front of a Taco Bell restaurant on May 01, 2024 in Richmond, California. 

    Justin Sullivan | Getty Images

    Yum Brands on Tuesday reported revenue that fell short of expectations as both Pizza Hut and KFC reported declining same-store sales.

    Shares of the company fell 1% in premarket trading.

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

    • Earnings per share: $1.35 adjusted. That may not compare with $1.33 expected.
    • Revenue: $1.76 billion vs. $1.8 billion expected

    Yum reported second-quarter net income of $367 million, or $1.28 per share, down from $418 million, or $1.46 per share, a year earlier.

    Excluding items, the company earned $1.35 per share.

    Net sales rose 4% to $1.76 billion.

    This story is developing. Please check back for updates.

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  • Long-predicted consumer pullback finally hits restaurants like Starbucks, KFC and McDonald’s

    Long-predicted consumer pullback finally hits restaurants like Starbucks, KFC and McDonald’s

    It’s finally here: the long-predicted consumer pullback.

    Starbucks announced a surprise drop in same-store sales for its latest quarter, sending its shares down 17% on Wednesday. Pizza Hut and KFC also reported shrinking same-store sales. And even stalwart McDonald’s said it has adopted a “street-fighting mentality” to compete for value-minded diners.

    For months, economists have been predicting that consumers would cut back on their spending in response to higher prices and interest rates. But it’s taken a while for fast-food chains to see their sales actually shrink, despite several quarters of warnings to investors that low-income consumers were weakening and other diners were trading down from pricier options.

    Many restaurant companies also offered other reasons for their weak results this quarter. Starbucks said bad weather dragged its same-store sales lower. Yum Brands, the parent company of Pizza Hut, KFC and Taco Bell, blamed January’s snowstorms and tough comparisons to a strong first quarter last year for its brands’ poor performance.

    But those excuses don’t fully explain the weak quarterly results. Instead, it looks like the competition for a smaller pool of customers has grown fiercer as the diners still looking to buy a burger or cold brew become pickier with their cash.

    The cost of eating out at quick-service restaurants has climbed faster than that of eating at home. Prices for limited-service restaurants rose 5% in March compared with the year-ago period, while prices for groceries have been increasing more slowly, according to the Bureau of Labor Statistics.

    “Clearly everybody’s fighting for fewer consumers or consumers that are certainly visiting less frequently, and we’ve got to make sure we’ve got that street-fighting mentality to win, irregardless of the context around us,” McDonald’s CFO Ian Borden said on the company’s conference call on Tuesday.

    Outliers show that customers will still order their favorite foods, even if they’re more expensive than they were a year ago. Wingstop, Wall Street’s favorite restaurant chain, reported its U.S. same-store sales soared 21.6% in the first quarter. Chipotle Mexican Grill, whose customer base is predominantly higher income, saw traffic rise 5.4% in its first quarter. And Restaurant Brands International’s Popeyes reported same-store sales growth of 5.7%.

    “What we’ve seen with the consumer is, if they are feeling pressure, they have a tendency to pull back on more high-frequency [quick-service restaurant] occasions,” Wingstop CEO Michael Skipworth told CNBC.

    He added that the average Wingstop customer visits just once a month, using the chain’s chicken sandwich and wings as an opportunity to treat themselves rather than a routine that can easily be cut due to budget concerns. Skipworth also said that Wingstop’s low-income consumers are actually returning more frequently these days.

    Even so, many companies in the restaurant sector and beyond it have warned consumer pressures could persist. McDonald’s CEO Chris Kempczinski told analysts the spending caution extends worldwide.

    “It’s worth noting that in [the first quarter], industry traffic was flat to declining in the U.S., Australia, Canada, Germany, Japan and the U.K.,” he said.

    Two of the chains that struggled in the first quarter cited value as a factor. Starbucks CEO Laxman Narasimhan said occasional customers weren’t buying the chain’s coffee because they wanted more variety and value.

    “In this environment, many customers have been more exacting about where and how they choose to spend their money, particularly with stimulus savings mostly spent,” Narasimhan said on the company’s Tuesday call.

    Yum CEO David Gibbs noted that rivals’ value deals for chicken menu items hurt KFC’s U.S. sales. But he said the shift to value should benefit Taco Bell, which accounts for three-quarters of Yum’s domestic operating profit.

    “We know from the industry data that value is more important and that others are struggling with value, and Taco Bell is a value leader. You’re seeing some low-income consumers fall off in the industry. We’re not seeing that at Taco Bell,” he said on Wednesday.

    It’s unclear how long it will take fast-food chains’ sales to bounce back, although executives provided optimistic timelines and plans to get sales back on track. For example, Yum said its first quarter will be the weakest of the year.

    For its part, McDonald’s plans to create a nationwide value menu that will appeal to thrifty customers. But the burger giant could face pushback from its franchisees, who have become more outspoken in recent years. While deals drive sales, they pressure operators’ profits, particularly in markets where it is already expensive to operate.

    Still, losing ground to the competition could motivate McDonald’s franchisees. This marks the second consecutive quarter that Burger King reported stronger U.S. same-store sales growth than McDonald’s. The Restaurant Brands chain has been in turnaround mode over the last two years and spending heavily on advertising.

    Starbucks is also betting on deals. The coffee chain is gearing up to release an upgrade of its app that allows all customers — not just loyalty members – to order, pay and get discounts. Narasimhan also touted the success of its new lavender drink line that launched in March, although business was still sluggish in April.

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  • Coke and Pepsi stocks are both struggling — but one beverage giant has more to worry about than the other

    Coke and Pepsi stocks are both struggling — but one beverage giant has more to worry about than the other

    Coca-Cola Co. and Pepsi Co. soda machines stand in a shopping center parking lot in Jasper, Indiana.

    Luke Sharrett | Bloomberg | Getty Images

    Coca-Cola and PepsiCo‘s rivalry spans decades, but Coke usually comes out on top.

    This quarter was no different.

    The beverage leaders’ stocks have struggled this year, hurt by higher interest rates and investor concerns about the possible negative impact of weight loss drugs like Wegovy. (Coke’s $242 billion market cap beats Pepsi’s by roughly $20 billion.)

    Even so, both companies topped Wall Street’s estimates for their third-quarter results and raised their full-year forecasts. Strong demand for Coke products drove the Atlanta-based company to raise its forecast, while Pepsi’s cost-management improvements have bolstered its full-year outlook for earnings.

    But only Coke managed to report volume growth. The metric, which strips out the effects of pricing and currency, has become more critical to investors in recent quarters as food and beverage companies pause the price hikes that drove sales growth last year. Those same increases have also alienated some shoppers who are trying to save money on their grocery bills.

    Coke’s overall volume rose 2% in the third quarter, while Pepsi reported flat beverage volume and a 1.5% decline in its food volume. In North America, the differences between the two businesses were even more stark. Coke reported flat volume, while Pepsi’s North American beverage unit saw volume fall 6%.

    Coke also raised both its top- and bottom-line outlook for the full year, while rival Pepsi only upped its forecast for its full-year earnings, signaling the better outlook might not be due to higher demand for its products.

    Here’s a rundown of the five key factors that helped Coke edge out Pepsi:

    Pricing strategy

    Coke started raising prices across its portfolio in the spring of 2021. PepsiCo followed its lead, starting its own price hikes that summer.

    More than two years later, both companies reported that higher prices have boosted sales. Pepsi paused price hikes earlier this year but plans a “modest” increase next year. Coke took longer to pause its higher prices, but CEO James Quincey said in July the company is done raising them for now in the United States and Europe.

    Because of the timing of their price increases, Coke’s North American drink prices were up only 5% this quarter, compared with Pepsi’s increase of 12%.

    “The higher the price increase, you would expect a bigger drag on volume,” Edward Jones analyst Brittany Quatrochi said.

    Better brands

    But Coke is also winning over shoppers with its drinks, while Pepsi is focused on revitalizing some of its non-soda brands like Gatorade.

    “Coke has been taking share from Pepsi for many, many quarters,” RBC Capital Markets analyst Nik Modi said.

    When its drinks business falters, Pepsi is usually saved by its Frito-Lay unit, which includes Cheetos, Doritos and other snacks. But snacking has slowed as shoppers trade down to cheaper options in the face of Frito-Lay’s double-digit price increases.

    “The reason why snacks have done so well relative to other categories is because it was really a trade down option on a meal,” Modi said.

    As the price for a bag of chips has climbed, some shoppers have reached for private-label brands — or just leftovers in the fridge.

    Pepsi is also getting rid of its less-profitable promotions. The strategy helps its earnings, but resulted in a 2.5% hit to its North American drink volume, executives said on the company’s conference call.

    Away-from-home business

    International strength

    Coke also has a larger international presence than Pepsi. Roughly 40% of Pepsi’s sales come from outside of the U.S., while more than 60% of Coke’s revenue is derived from international markets, according to FactSet.

    “There’s stronger growth in those international markets,” Edward Jones’ Quatrochi said.

    International success can offset more sluggish domestic demand, like the 6% volume decline for Pepsi’s North American beverage. But that comes at a price.

    Some international markets, like Argentina and Turkey, have been dealing with hyperinflation, leading Coke to raise prices even after pausing hikes in the U.S. and Europe. And the strong dollar means Coke anticipates that currency exchange rates will dent its sales and earnings more than previously expected this year.

    Franchising its bottling

    The biggest difference between Coke and Pepsi isn’t found in their portfolios. It’s how they bottle their soda.

    Coke works with independent bottlers who manufacture, package and ship their drinks to customers. Those bottlers know their markets well and can make their own informed decisions for their businesses.

    In contrast, Pepsi owns more than three-quarters of its North American bottling operations. The strategy is meant to help the company exert more control and cut costs, but it also requires devoting resources and capital to bottling soda, a category that has faced waning demand for nearly two decades.

    “Right now, I think the whole bottling owned versus not owned is showing up in the results,” Modi said.

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  • ‘Taco Tuesday’ is for everyone, argues Taco Bell. Taco John’s says it owns the trademark to the phrase.

    ‘Taco Tuesday’ is for everyone, argues Taco Bell. Taco John’s says it owns the trademark to the phrase.

    CHEYENNE, Wyo. (AP) — Declaring a mission to liberate “Taco Tuesday” for all, Taco Bell is asking U.S. regulators to force Wyoming-based Taco John’s to abandon its longstanding claim to the trademark.

    Too many businesses and others refer to “Taco Tuesday” for Taco John’s to be able to have exclusive rights to the phrase, Taco Bell asserts in a U.S. Patent and Trademark Office filing that is, of course, dated Tuesday.

    It’s the latest development in a long-running beef over “Taco Tuesday” that even included NBA star LeBron James making an unsuccessful attempt to claim the trademark in 2019.

    “Taco Bell believes ‘Taco Tuesday’ is critical to everyone’s Tuesday. To deprive anyone of saying ‘Taco Tuesday’ — be it Taco Bell or anyone who provides tacos to the world — is like depriving the world of sunshine itself,” the Taco Bell filing reads.

    A key question is whether “Taco Tuesday” over the years has succumbed to “genericide,” New York trademark lawyer Emily Poler said. That’s the term for when a word or phrase become so widely used for similar products — or in this case, sales promotions — they’re no longer associated with the trademark holder.

    Well-known examples of genericide victims include “cellophane,” “escalator” and “trampoline.”

    “Basically what this is about is you cannot trademark something that is ‘generic,’ ” Poler said. “That means it doesn’t have any association with that particular source or product.”

    Basketball legend James — a well-known taco lover — encountered this problem when he tried to trademark “Taco Tuesday” in 2019. The Patent and Trademark Office, in a ruling that didn’t refer to Taco John’s, deemed “Taco Tuesday” too much of a “commonplace term” to qualify as a trademark.

    With more than 7,200 locations in the U.S. and internationally, Taco Bell — a Yum Brands
    YUM,
    -2.45%

    chain along with Pizza Hut, KFC and the Habit Burger Grill — is vastly bigger than Cheyenne-based Taco John’s. Begun as a food truck more than 50 years ago, Taco John’s now has about 370 locations in 23 mainly in western and midwestern states.

    The chain’s size hasn’t discouraged big-time enforcement of “Taco Tuesday” as trademark, which dates to the 1980s. In 2019, the company sent a letter to a brewery just five blocks from its corporate headquarters, warning it to stop using “Taco Tuesday” to promote a taco truck parked outside on Tuesdays.

    Actively defending a trademark is required to maintain claim to it, and the letter was just one example of Taco John’s telling restaurants far and wide to stop having “Taco Tuesdays.”

    Taco John’s responded to Taco Bell’s filing by announcing a new two-week Taco Tuesday promotion, with a large side of riposte.

    Press release: Ring the Bell! Every Day is Taco Tuesday® at Taco John’s

    “I’d like to thank our worthy competitors at Taco Bell for reminding everyone that Taco Tuesday is best celebrated at Taco John’s,” CEO Jim Creel said in an emailed statement. “We love celebrating Taco Tuesday with taco lovers everywhere, and we even want to offer a special invitation to fans of Taco Bell to liberate themselves by coming by to see how flavorful and bold tacos can be at Taco John’s all month long.”

    The filing is one of two from Taco Bell involving “Taco Tuesday.” One contests Taco John’s claim to “Taco Tuesday” in 49 states, while a similar filing contests a New Jersey restaurant and bar’s claim to “Taco Tuesday” in that state. Both Taco John’s and Gregory’s Restaurant and Bar in Somers Point, N.J., have been using “Taco Tuesday” for over 40 years.

    A Taco John’s franchisee in Minnesota first came up with “Taco Twosday” to promote two tacos for 99 cents on a slow day of the week, Creel told the Associated Press in a recent interview.

    The Patent and Trademark Office approved the Taco John’s “Taco Tuesday” trademark in 1989. Even with its many letters, Creel said, the company — established in 1969 in Cheyenne, Wyo. — has never had to go to court over the phrase.

    He’s not feeling too picked on, either, by the much bigger Taco Bell. “It’s OK. It’s kind of nice that they’ve noticed,” Creel said.

    From the archives (January 2022): Taco Bell takes taco subscription program nationwide

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  • Jim Cramer’s top 10 things to watch in the stock market Thursday

    Jim Cramer’s top 10 things to watch in the stock market Thursday

    My top 10 things to watch Thursday, May 4

    1. In a widely expected move, the Federal Reserve on Wednesday raised interest rates by 25 basis points — the 10th rate increase in just over a year. Fed Chair Jerome Powell indicated the central bank may pause rate hikes going forward, but did not suggest it would begin cutting anytime soon. The Fed must see weakness in wages to consider pulling back.

    2. Regional bank stocks are under pressure, with PacWest Bancorp (PACWP) in focus. Shares of the California lender are down 39% in premarket trading, at just under $4 apiece, and it is reportedly considering a sale. “Leaving rates this high is going to continue this stress,” DoubleLine CEO Jeffrey Gundlach told CNBC. “I believe with a very high degree of probability there’s going to be further regional bank failures.”

    3. The debt-ceiling debacle continues, with the U.S. hurtling towards a June 1 deadline by which it could default on its debt obligations. The 2011 debt standoff offers some lessons for investors.

    4. Oil prices fell to their lowest level since Dec. 2021 on concerns over demand and an uneven economic recovery in China, before edging up Thursday. West Texas Intermediate crude — the U.S. oil benchmark — slid nearly 11% over the past three sessions and was flat in morning trading, at around $68 a barrel.

    5. Club holding Apple (AAPL) is set to report quarterly results after the closing bell Thursday, with analysts predicting the iPhone maker will announce $90 billion in share buybacks and dividends. We also got a potential readthrough from Club name Qualcomm (QCOM) Wednesday when the chipmaker announced a weaker-than-expected forecast for handsets on the back of slower demand in China.

    6. A slate of banks on Thursday lower their price targets on Estee Lauder (EL) after shares of the Club holding plunged more than 20% Wednesday on weak forward guidance. Wells Fargo reduces its price target on the prestige beauty name to $225 per share, from $290, while Citi drops its target to $240 a share, from $295.

    7. Mizuho lowers its price target on Club stock Emerson Electric (EMR) to $90 a share, from $103, and maintains a neutral rating, noting moderating demand in the discrete manufacturing market. Emerson on Wednesday delivered a solid fiscal second quarter, while raising its full-year outlook.

    8. Citi says Yum! Brands‘ (YUM) post-earnings selloff is a buying opportunity, with the stock closing down nearly 4% on Wednesday. The firm raises its price target on YUM to $172 a share, from $170, while reiterating a buy rating on the stock.

    9. Club holding Costco Wholesale‘s (COST) same-store sales for April rose 1.4%, compared with a 1.1% decline in March, the retailer reported Wednesday. Truist on Thursday lowers its price target on COST to $568 a share, from $571, but maintains a buy rating on the stock for its “extreme value proposition.”

    10. Kellogg (K) delivers better-than expected first-quarter results Thursday, with adjusted earnings-per-share coming in at $1.10, compared with analysts’ forecasts for $1 a share. The food manufacturing company also raises its adjusted-basis operating profit growth to be in a range of more than 8% to more than 10%.

    (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.)

    As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade.

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  • Why Pizza Hut’s red roofs and McDonald’s play places have disappeared | CNN Business

    Why Pizza Hut’s red roofs and McDonald’s play places have disappeared | CNN Business


    New York
    CNN Business
     — 

    For decades, bright, playful and oddly-shaped fast-food restaurants dotted the roadside along America’s highways.

    You’d drive by Howard Johnson’s with its orange roofs and then pass Pizza Hut’s red-topped huts. A few more miles and there was the roadside White Castle with its turrets. Arby’s roof was shaped like a wagon and Denny’s resembled a boomerang. And then McDonald’s, with its neon golden arches towering above its restaurants.

    These quirky designs were an early form of brand advertising, gimmicks meant to grab drivers’ attention and get them to stop in.

    As fast-food chains spread across the US after World War II, new roadside restaurant brands needed to stand out. Television was new media not yet beamed into every single home, newspapers were still ascendant and social media unimaginable.

    So restaurant chains turned to architecture as a key tool to promote their brand and help create their corporate identity.

    But the fast-food architecture of today has lost its quirky charm and distinctive features. Shifts in the restaurant industry, advertising and technology have made fast-food exteriors bland and spiritless, critics say.

    Goodbye bright colors and unusual shapes. Today, the design is minimal and sleek. Most fast-food restaurants are built to maximize efficiency, not catch motorists’ attention. Many are shaped like boxes, decorated with fake wooden paneling, imitation stone or brick exteriors, and flat roofs. One critic has called this trend “faux five-star restaurants” intended to make customers forget they are eating greasy fries and burgers.

    The chains now sport nearly identical looks. Call it the gentrification of fast-food design.

    “They’re soulless little boxes,” said Glen Coben, an architect who has designed boutique hotels, restaurants and stores. “They’re like Monopoly homes.”

    Fast-food restaurants developed and expanded in the mid-twentieth century with the explosion of car culture and the development of interstate highways.

    Large companies came to dominate highway restaurants through a strategy known as “place-product-packaging” – the coordination of building design, decor, menu, service and pricing, according to John Jakle, the author of “Fast Food: Roadside Restaurants in the Automobile Age.”

    Fast-food chains’ buildings were designed to catch the eye of potential customers driving by at high speeds and get them to slow down.

    “The buildings had to be visually strong and bold,” said Alan Hess, an architecture critic and historian. “That included neon signs and the shape of the building.”

    A leading example: McDonald’s design, with its two golden arches sloping over the roof of its restaurant, a style known as Googie.

    A historic 1950's McDonald's restaurant in Downey, California, shown in 2015. It's the oldest McDonald's still in existence.

    Introduced in California in 1953, McDonald’s design was influenced by ultra-modern coffee shops and roadside stands of Southern California, then the heart of budding fast-food chains.

    The two 25-foot bright yellow sheet-metal arches that rose through the McDonald’s buildings were tall enough to attract drivers amid the clutter of other roadside buildings, their neon trim gleaming day and night. McDonald’s design set off a wave of similar Googie-style architecture at fast-food chains nationwide.

    Well into the 1970s, the designs were a prominent fixture of the American roadside, “imprinting the image of fast-food drive-in architecture in the popular consciousness,” Hess wrote in a journal article.

    But there was a backlash to this aesthetic. As the environmental movement developed in the 1960s, opposition to the conspicuous Googie style grew. Critics called it “visual pollution.”

    “Critics hated this populist, roadside commercial California architecture,” Hess said. Googie style fell out of fashion in the 1970s as fast-food style favored dark colors, brick and mansard roofs.

    McDonald’s new prototype became a low-profile mansard roof and brick design with shingle texture. Its arches moved from atop the building to signposts and became McDonald’s corporate logo.

    Opposition grew to garish structures like this Jack in the Box in 1970.

    “McDonald’s and Jack in the Box unfurled their neon and Day Glo banners and architectural containers against the endless sky,” the New York Times said in 1978. They have been “toned down with the changing taste of the 60’s and 70’s.” And with the growth of mass communications advertising campaigns, brands no longer relied on architectural features to stand out –they could simply flood the television airwaves.

    In the 1980s and 1990s, companies began introducing children’s play areas and party rooms to draw families – additions to existing “brown” structures, Hess said.

    The rise of mobile ordering and cost concerns since then altered modern fast-food design.

    With fewer people sitting down for full meals at fast-food restaurants, companies didn’t need elaborate dining areas. So today they’re expanding drive-thru lanes, increasing the number of pickup windows and adding digital kiosks in stores.

    A Wendy's in 2020, an example of the modernization of fast-food design.

    “We have a lot of red-roof restaurants” that “clearly need to go away,” a Pizza Hut executive said in 2018 of its classic design. The company’s new prototype, “Hut Lanes,” helps to speed up wait times at drive-thru locations.

    The new fast-food box designs with their flat roofs are more efficient to heat and cool than older structures, said John Gordon, a restaurant consultant. Kitchens have been reconfigured to speed up food preparation. They’re also cheaper to build, maintain and staff a smaller store.

    But in the effort to modernize, some say fast-food design has became homogenized and lost its creative purpose.

    “I don’t know if you’d be able to identify what they were if they had a different name on the front,” said Addison Del Mastro, an urbanist writer who documents the history of commercial landscapes. “There’s nothing to engage the wandering imagination.”

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  • Fast food reigns supreme as inflation weighs on pricier restaurants

    Fast food reigns supreme as inflation weighs on pricier restaurants

    A girl waiting in line to pick up an order at a McDonald’s restaurant.

    Oleksii Chumachenko | SOPA Images | Lightrocket | Getty Images

    Fast-food chains are looking like the big winners in the fourth quarter — and beyond — as fast-casual and casual-dining restaurants struggle to attract customers.

    Many publicly traded restaurant companies haven’t reported their latest quarterly results yet, but for those that have, a pattern is emerging. Inflation-weary customers pulled back their restaurant spending during the holiday season, just as they spent less than expected at retailers. Savvy fast-food chains appealed to those consumers with value menus and enticing promotions, drawing in customers across the income spectrum.

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    Generally, the fast-food sector fares better than the rest of the industry during times of economic uncertainty and downturns.

    Take McDonald’s, for example. The fast-food giant said U.S. same-store sales climbed 10.3%, helped in part by low-income consumers returning more frequently than they had for the prior two quarters. Executives also credited the success of its Adult Happy Meal promotion and the annual return of the McRib for its strong sales growth. Its U.S. traffic increased for the second consecutive quarter, bucking the industry trend.

    Likewise, rival Yum Brands reported solid U.S. demand. Taco Bell’s domestic same-store sales climbed 11%, boosted by increased breakfast orders, the return of Mexican Pizza and its value meals. Pizza Hut’s U.S. same-store sales grew 4%, while KFC’s ticked up 1% as it faced tough year-ago comparisons.

    More fast-food earnings are on deck in the coming weeks. Burger King owner Restaurant Brands International is slated to announce its fourth-quarter results on Tuesday, while Domino’s Pizza will post its earnings Feb. 23.

    ‘We just didn’t see that pop’

    In contrast to McDonald’s and Yum’s strong results, Chipotle Mexican Grill on Tuesday reported quarterly earnings and revenue that fell short of Wall Street’s estimates for the first time in more than five years. CEO Brian Niccol maintained that the burrito chain’s price hikes haven’t led to “meaningful resistance” from customers.

    Instead, Chipotle executives presented a laundry list of reasons why its performance disappointed: bad weather, the underperforming launch of Garlic Guajillo Steak, tough comparisons to the previous year’s brisket launch and seasonality.

    Customers order from a Chipotle restaurant at the King of Prussia Mall in King of Prussia, Pennsylvania.

    Mark Makela | Reuters

    “As we got around the holidays, we just didn’t see that pop, that momentum, that we normally see … frankly, we started the quarter soft, and we ended the quarter soft,” Chipotle Chief Financial Officer Jack Hartung said on the company’s conference call, comparing the decline in December to weaker retail sales at that time.

    Chipotle said that traffic turned positive in January. However, the chain is facing easy comparisons to a year earlier, when Omicron outbreaks forced Chipotle and other chains to shutter early or temporarily close locations. And Bank of America analyst Sara Senatore noted in a research note on Wednesday that January’s unseasonably warm weather has been supporting demand for the broader industry.

    Rival fast-casual chains haven’t reported their fourth-quarter earnings yet. Shake Shack is set to share its results on Feb. 16. However, in early January, it announced preliminary same-store sales growth that fell short of Wall Street’s estimates. Sweetgreen is slated to report its results on Feb. 23, while Portillo’s is scheduled for March 2.

    Casual-dining concerns

    A customer walks towards the entrance of a Brinker International Inc. Chili’s Grill & Bar restaurant in San Antonio, Texas.

    Callaghan O’Hare | Bloomberg | Getty Images

    At the start of the month, Brinker reported that Chili’s traffic fell 7.6% for the quarter ended Dec. 28. Brinker CEO Kevin Hochman, the former head of KFC’s U.S. business, told analysts on the company’s conference call that the decline was expected as it tries to shed less profitable transactions. Chili’s has hiked its prices and cut down on coupons as part of the strategy.

    More full-service restaurants are expected to report their results later this month. Outback Steakhouse owner Bloomin’ Brands is slated to make its announcement on Feb. 16.

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