Taco Bell and KFC are feeling the pressure from price-conscious consumers

Originally Published: 07 FEB 24 08:19 ET Updated: 07 FEB 24 12:53 ET By Jordan Valinsky, CNN

New York (CNN) — Taco Bell, KFC and Pizza Hut’s parent company is facing the same problem as its rivals: Fast food is getting too expensive and consumers are pushing back.

Yum Brands, which owns all three chains, reported Wednesday weaker-than-expected sales in the fourth quarter. Despite the miss, shares rebounded in midday trading after initially falling, and are now up more than 3%.

In particular, Taco Bell, typically the company’s most popular chain, reported sales at restaurants open at least a year grew 3% for the quarter — a steep decline from the 11% growth it registered for the same quarter a year earlier when a revamped breakfast menu and the Mexican Pizza fueled sales.

Meanwhile, Pizza Hut’s US sales slid 4% in fourth quarter and KFC sales were flat, with both brands’ numbers also coming in below analysts’ expectations. In total, same-store sales at all three chains plus Habit Burger rose 1% in quarter, missing analysts’ estimates of a 3.9% increase.

In a call with analysts, CEO David Gibbs said the chains’ “topline sales were impacted by the conflict in the Middle East region with varying degrees of impact” which dented same-store sales growth in several countries.

“This trend has continued into the first quarter, and we expect that sales impact decreased over the course of 2024,” he added.

KFC’s Middle East unit saw its sales decline 5% for the quarter, and Pizza Hut’s slid 3%.

Yum Brands is the third fast food company to report a disappointing earnings report as consumers more closely examine where they’re spending money.

Part of the problem: Although grocery prices are still high, they rose just 1.3% overall in 2023, compared to dining out, which surged 5.2%, according to the latest Consumer Price Index report. That’s putting pressure on lower-income consumers, a vital base for fast food chains.

However, Gibbs said Taco Bell, which makes up a “vast majority” of Yum’s US sales and profits, “actually it looks like we’re doing a great job of holding onto them.”

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