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Restaurant

KFC Parent Doubles Down On Deals As Consumers Cut Spending

By Dave Simpson

Yum Brands Inc has said that 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.

Details

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

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

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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 MCD.N and Starbucks Corp SBUX.O, 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.

Third-Party Delivery Services

Pizza Hut sales faltered even as more than half of its US 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.

News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition.

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