YUM BRANDS INC Q1 FY2025 earnings call

• Twin Growth Engines: Taco Bell U.S. saw 9% same-store sales growth and 16% operating profit increase; KFC International had 554 growth openings and was named fastest growing international franchise.
• Digital Momentum: Taco Bell's digital mix reached 42%, KFC kiosks accounted for nearly 50% of digital sales, Pizza Hut UK mobile app transactions grew 67% year-over-year.
• Innovations: Taco Bell launched Live Mas Cafe, KFC has Saucy concept, Pizza Hut outlined 3D strategy (distinctive offerings, dependable value, disruptive innovation), and partnered with NVIDIA for AI development.
• Leadership Transitions: Meg Farren promoted to Taco Bell North America President, Catherine Tan-Gillespie became KFC U.S. President.

Taco Bell U.S.: Delivered system sales up 11% with 9% same-store sales growth, operating profit up 16%. Accounts for 37% of divisional operating profit. KFC International: Had 554 growth openings across 50+ countries, same-store sales accelerating, named fastest growing international franchise. KFC U.S.: Double value promotion led to low single-digit transaction growth. Pizza Hut: System sales down 3%, operating profit impacted by transition expenses and technology spending timing. Habit Burger and Grill: System sales flat, restaurant level margin improved 310 basis points despite labor headwinds in California.

• Core operating profit expected to grow 8% in 2025, excluding the lap of the 53rd week in 2024.
• Taco Bell U.S. full year margins forecasted 24%-25%.
• FX tailwind of $10 million to GAAP operating profit for the remainder of 2025.

• Tariff risk minimal due to global sourcing. - Potential challenges in Pizza Hut U.S. from competitive environment and category pressures. - Interest rate risk managed via hedging, but macroeconomic uncertainties persist.

Q: On KFC International's sustainability, how is the growth sustained?

A: David Gibbs notes backing out Ramadan impact, 5% same-store sales growth internationally when excluding China, growth in 10 measured markets, and value leanings like Canadian $5 price point and Korea's buy one get one free.

Q: On full year guidance back weighted nature, confidence in second half acceleration?

A: Chris Turner states Q1 was a good start, Q1 is seasonally low, company store margins on plan, and plans to lap favorable factors at Pizza Hut to drive full year profit.

Q: On unit development outlook despite macro downturn?

A: Chris Turner mentions confident development plan, upbeat franchisee mood at global convention, KFC's second highest Q1 gross openings, and Pizza Hut's net development expected higher year over year.

Q: On Byte and Saucy's future?

A: Chris Turner says Byte investment is paying off, priority is serving Yum! system franchisees, and Saucy is being methodically expanded with focus on best partners and supply chain scaling.

Q: On KFC U.S. and Pizza Hut 3D strategy?

A: David Gibbs talks about Taco Bell International growth potential, KFC U.S. value promotions and Saucy concept, and Pizza Hut's 3D strategy for distinctive offerings and growth in U.S. and international markets.

Q: On NVIDIA partnership's short and medium term goals?

A: David Gibbs states NVIDIA partnership is for voice AI, vision, and analytics initiatives, with 40 AI projects ongoing, and focus on serving Yum! system franchisees initially.

Q: On Taco Bell's 2-year performance persistence?

A: David Gibbs says April trends continue Q1's momentum, Taco Bell's value offerings, innovation, and digital work support continued strong performance despite lap challenges.