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KFC parent doubles down on deals as consumers cut spending

Stock Markets Aug 03, 2022 08:51PM ET
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4/4 © Reuters. FILE PHOTO: Kentucky Fried Chicken (KFC) tenders, a bucket and box of chicken are seen in this picture illustration taken April 6, 2017. REUTERS/Carlo Allegri 2/4

By Praveen Paramasivam

(Reuters) -Yum Brands Inc said on Wednesday it would offer new items and promotional deals as it seeks to reverse a slowdown in demand for its pizzas and fried chicken from low-income consumers.

Americans are increasingly tightening their belts as household savings drop and prices of gas and everyday essentials rise, hitting corporate earnings.

Retail giants Walmart (NYSE:WMT) Inc and Best Buy Co Inc (NYSE:BBY) have already lowered their earnings estimates, while McDonald's Corp (NYSE:MCD) is considering more discounts as consumers turn to cheaper items.

People are getting more cautious, with the pullback from low-income consumers getting more pronounced, Yum Chief Executive Officer David Gibbs said.

Yum has brought back its Mexican pizza at Taco Bell and $5 macaroni and cheese bowls at KFC and is banking on lower-priced offers at Pizza Hut to attract customers.

The company plans to double down on promotional offerings after its quarterly earnings missed estimates on increased costs of ingredients, labor and packaging material that pushed its overall expenses by 4%.

Yum second-quarter adjusted earnings per share of $1.05 fell short of estimates of $1.09, sending its stock down as much as 3.2%.

The company's earnings come on the heels of better-than-expected profits from rivals McDonald's Corp and Starbucks Corp (NASDAQ:SBUX), which managed to offset higher expenses through price increases.

Yum reported quarterly same-store sales growth of 1%, largely in line with estimates, with Taco Bell posting a better-than-expected 8% increase to make up for declines at KFC and Pizza Hut.

Pizza Hut sales faltered even as more than half of its U.S. restaurants adopted third-party delivery services at the end of the quarter to beef up their operations, up from 40% at the beginning of the quarter.

KFC parent doubles down on deals as consumers cut spending
 

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