Yum! Brands (YUM) Q2 2024 earnings summary

Executive summary

• Achieved 10% core operating profit growth and 6% GAAP operating profit growth in Q2 2024, despite challenging macro and geopolitical headwinds, particularly from the Middle East conflict and cost-conscious consumer behavior.

• Total revenues for Q2 2024 increased 4% year-over-year to $1.76 billion; year-to-date revenues up 1% to $3.36 billion.

• System sales grew 3% year-over-year, driven by 5% unit growth and strong performance from Taco Bell US and KFC International.

• Digital sales and technology initiatives, including AI and proprietary platforms, are accelerating operational efficiency and consumer engagement, with digital sales exceeding 50% of total.

• Continued focus on value offerings and innovation across brands to address consumer affordability concerns and drive traffic.

Financial highlights

• Core operating profit up 10% year-over-year to $645 million; reported operating profit increased 6% to $607 million, with a $12M negative FX impact.

• Net income for Q2 2024 was $367 million, down from $418 million in Q2 2023; diluted EPS was $1.28, a 12% decrease year-over-year.

• Ex-special G&A expense down 9% year-over-year to $256M; reported G&A was $281M, including $25M in special expenses.

• Ex-special EPS was $1.35, negatively impacted by higher tax rate and lower investment gains.

• Net capital expenditures for the quarter were $31M; net leverage ratio at 4.1x.

Outlook and guidance

• On track for 5% unit growth for full year 2024, with gross unit openings expected to match 2023 levels.

• Confident in delivering at least 8% core operating profit growth for the full year, excluding the 53rd week.

• Expect sequential improvement in same-store sales growth each quarter, with easier comparisons in Q4 as Middle East impacts lap.

• Full-year Taco Bell company-operated store margins expected in the 23%-24% range.

• Full-year operating cash flows expected to exceed $1.3 billion.