YUM - Earnings call transcript Q2 2021

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Operator

Good morning, and welcome to the Second Quarter 2021 Yum! Brands, Incorporated Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I'd now like to turn the conference over to Jodi Dyer, Vice President of Investor Relations and CFO, Digital & Technology. Please go ahead.

Jodi Dyer

operator. Thanks, and joining everyone, you thank morning, us. for Good David CEO; and Chris our Corporate Russell, call our our are today Controller. and President Officer; On Turner, Gibbs, Chief Senior Vice our Dave Financial

Chris, and David from remarks we'll the questions. call open to Following

would started, this statements. to remind Before conference I you includes call we like get forward-looking that

of actual forward-looking subject materially date with from differ and the are SEC. and announcement statements in statements of included to made this future Forward-looking as uncertainties our that earnings risk the be conjunction statements. All should results events to could are only filings factors statements release cause considered our the with and these in the in our cautionary

our system of the growth and Please filings find of disclosures the sales are In profit today's financial growth calculated operating used results All regarding non-GAAP to impact figures our our using with releases currency. X-year addition, Core the please refer exclude currency same-store items. and of our SEC reconciliations figures geometric sales to basis that the All following presentation. call. special earnings on may method. of exclude the of impact measures note be sections and relevant foreign

For the more market, our of for our please calendar Financial each information on reporting visit website. section Reports

debt time filing. the question, Investor Disclosures be a this at Yum! like any for will ask the playback. group you in via of of are is make advised pertaining in our events will of our will upcoming the if live call capital recorded in restricted the conference both you and available and We use also Please provided broadcasting We website. structure be and XX-Q This being would following: conference be call our that Form included to be future recording. it to outstanding aware

released day. on XXXX, will October the same with earnings call conference Third on XX, quarter be the

Gibbs. David to to call like the turn Now, over Mr. I'd

David Gibbs

Thank strong quarter Jodi, to as and share our same-store record you, I'm development second sales everyone. unit XX% results excited quarter delivered second and good morning, we growth.

of same-store and division an in creates from Yum!. Importantly, COVID in sustained digital underpinned to changing positive confidence investments is operating adaptability first more meet than our of premise in This our brands in the resulting the a by uncertainties needs and reported to consumers potential momentum X-year each a off growth growth was and ever sales ever quarter environment. long-term of step-up obviously Though environment, a navigate our our basis, trends. stronger challenged ability the on the

we're result, X% As growth with algorithm a previous reinstating X% of unit guidance unit between we our long-term raising our one and growth. X% growth change, important are to

business accelerated teams allowing model, including our impacted single-digit growth, markets by and markets recovery conditions, reminder, compete portfolio, of the sales to full profit win of and core a sales long-term still The to operating COVID. growth. those both X% X% market the a agility in high-single-digit growth our system and and are with range resilience to heavily our us of same-store algorithm As mid-to-high of growth, includes diversification leading our global

positioned forward, teams, Looking restaurant store franchisees, our and scale, and talent world-class growth. in have in leaders iconic combination with our the brands uniquely above for unmatched us sustained

QX balance details Then sheet and Unmatched of Capability for short; and our growth will and easy, it. Restaurant performance our results, and two our Chris and strong Unrivaled drivers and more Culture drivers, and discuss relevant, namely RED, short; Bold share distinctive drivers & Development position. the for QX our underpin for cover To our Operating start, growth Talent. or RED brands growth I'll liquidity we'll Now, growth recipe that

by driven highlights QX, sales system growth. Yum! quarter. XX% the few XX%, a grew In same-store from First, sales

a end includes performance on being COVID approximately X% the of temporarily grew due or impact the stores X% which to basis, XXX as of of was to closed Importantly, and of and recovery. This as driven improved same-store UK, our about XXXX. it Europe X-year North sales strong by QX of in reopen continued America, showed sales signs momentum began with Australia in the

brand as which our As brands recovery, in earlier, units a for was an is XXX This indicator extremely growth closures, delivered each I of basis, growth global and positive strength setting. during new sales the and sustained and improvement we of based including broad from great X-year exciting mentioned quarter, QX. both the trend X-year net the record our same-store on temporary impact the strong even reported the of a of that each breadth more unit delivered also

and geared seen access in We've by across performance for and and mobility trends A country. seamless through the multiple initiatives priority country our serve our is the the our premise teams many the more our to from providing driver vaccinations new acceleration that advantages contributed of diversified business armed competitive operate, with a global in positive, trend customer we neither portfolio XXX of insight our technology key strong the customers of reopening ways be to which will to continued overall and This countries while increased channels. markets. consistent to the growth recovery toward nor digital that driven across brands. within our and for customers and ability globe seen than we've Looking off linear reinforces country is our

early few grow the for U.S., a Taco exclusives, in At excited to highly a customer our I of our and has brand Rewards Taco sales. remains. uptick to early such bring Bell a an with We're $XX an of trailing opportunity overall our in future incremental even believe worthy over the Bell sales top features active We're for first seeing teams more and exciting the investments share results the higher growth the Bell increase importance member a from sales enable to to continued time a proof Rewards We deliver incredibly Program pre-loyalty from in billion To behavior. quarter XX% billion frequency delivered the on by of XX-month are digital RED the that Even X delivered for result our efforts of and launch to remains points. more to technology per digital XX% these the than significant continue prior which economies as as experience. digital Taco access to leading ecosystem, record digital life, our increase crave XXXX loyalty Program impact program and in their in the more digital the want promotions. off-premise the Even customers over basis, we to in with and spend occasion second priority. visits year. We reopen, in compared sales, spend

at KFC third-party launched example, another and our U.S., built XXXX e-commerce internally website solution. KFC app in As we our previous replacing early

year's XXXX sales amount. surpass to pace digital last full-year our digital result, on soon are a As sales

our QX Now, let's by growth XX% sales same-store brands. approximately talk system operating grew and of accounts divisional with XX% Starting the about driven RED growth. profit, unit KFC our which division, for XX% X% sales

QX same-store XX% end grew temporarily Middle market and about as on quarter. grew closed of the being For basis, closed X% of stores double-digit International, We our of a the stores outstanding East. XXXX. the of includes the in the of of QX the had which of being X% results during sales recovery UK, KFC to X% X-year basis, of same-store about XXXX. Australia, end with impact X-year a same-store leading sales on the Same-store sales temporarily At the Division, our impact declined which as includes X-year QX truly in sales growth X% Canada,

off-premise as increases continued around globe, reopening shifting for and mobility strength, strong globally. to digital and capabilities, recovery value offerings is the and there Our continued opportunity have consumer meet demand

KFC strong momentum growth see XX% U.S., in we QX. at Next, same-store continue with sales to

our owing Importantly, same-store on and capabilities X-year group earlier, basis, a continued sales the occasion new the mentioned XX% our sandwich. to digital of business, grew chicken strength

sandwich well sales in solid a provides the chicken layers with performed to Our future. additional exceptionally and drive platform us

our Pizza of by XX% sales which XX% division sales accounts same-store approximately driven reported to system XX% growth on operating Hut, profit, Moving the QX for of divisional growth.

COVID-related the XXXX our same-store of delivering sustained division stores it the QX of as being QX temporarily X% Global temporarily had grew the the versus sales grew impact last about the on X% declined momentum stores includes being closed a of relative of of sales XXXX decline X% X% and unit about of X% International sales QX impact the of QX. end growth positive of X-year has XXXX. same-store Hut of which as year, end a closed X-year Overall, which elevated basis, dislocations Same-store by X% Pizza on a to While our includes its XX%. development driven unit closures basis, XXXX.

overall growth the of the includes primary in of to U.S., about X-year a with world. on see and to growth closed sales same-store quarter U.K. who Canada, as same-store a the basis, also towards X% Australia, value XX% our bring Malaysia, Hut a through strong of help delivery means and life with experience, X%, successful product the innovation, off-premise communications for pizza Pizza RED growth spokespeople X% top stuffed favorite, of our overall achieved grew On from most temporarily magnetic an off-premise as continued focus during sales being ambassadors, examples positive continue Pizza and Edge Hut the what of end and of channel of and The QX off-premise same-store nail stores sales the grew the same-store our be iconic continues XX% strategy. These our shining return model the growth. continued of to off-premise the impact distinctive to across line customer markets. markets are Pizza channel continue consumer sales business of shift our a results X-year Brand to of Hut a Importantly, delivery the success the it crust brand basis the opportunities news delivered the XXXX. At the our our and we unlock digital-first Pizza driver quarter. with on which

XX% driven growth. X% divisional operating sales a by QX XX% which profit, As system accounts for growth grew for Taco unit XX%, and same-store approximately Bell, our sales of

taco. Box, when Grill and moon delivered X% a Habit like have generated XX% unit And growth. brand international we awareness, a where the especially Burger X-year for finally, on a our the taco X% In with markets For of Quesalupa quarter free growth. could impressions rate growth kicked fans campaign, a as over the of of grew basis. sales fan-favorite the our QX Cravings iconic tremendous sales #ISeeATaco, first-ever X by Chalupa. run billion looked Naked We score step-change on same-store division, launched $X in Chalupa the and same-store QX same-store sales the basis. re-launch XX% May, brand the in a grew global Chicken off return we two-year the followed which part The

sales and digital XX%, rooms throughout Importantly, improvement over dining re-opening from saw a pullback as a dine-in sales continued only even steady to quarter. modest the mix QX, continued

On the the house-made the offering secret sauce quarter, introduced unique that innovation freshly included Brunch Charburger crisp breakfast golden and tots, egg. a front, all-day during cracked we a

providing for operate our team access In restaurant brands, customers continue addition restaurant. in seamless with a make technology experience initiatives members invest to our run to easier a to and that to we it

a close food As approvals previously company, tracking. and order driver the various to acquire automating third of including Technologies, subject the on quarter. the entire kitchen we’ve managing from we delivery, by whose order is the optimizing and cutting-edge focused dispatch, and customer process platform through The announced the to is to flow, agreed expect restaurant in technology quarter, preparation acquisition end Dragontail

XX can important factor release. additional of will you but further having to press be in a Dragontail comment on impact to good May We information the easy and customers. RED desire the An is make Brands find for today, able not positive

right change growth to our impact the impact that on highlights in Our commitments of positive critical confident people, food, Good our for today. our report I’m and to planet. and were like customers, us succeed on to proud our recipe the publish right inclusion. ingredients We and and our stewardship plans strategic climate focuses report week, a XXXX areas in Recipe includes Recipe The franchisees, this issues have updates socially key equity our for the sustainable commitment framework these for on on communities. Good and and investing our make responsible which people, for investments in

and brands culture bring Now, our talent. to unrivaled the iconic the assets life of to Two world day. key and every around our our that people are brands

supply independent this of As the probably you of and with example Steve COVID Many was of in that to is I’ve XXXX selected succeed RSCS. of our on RSCS unanimously Steve it quarters, the lead is decade to role impact positive has purchasing entire our A continues grateful the announcement Todd RSCS has Officer, U.S. that in right great across the has system. strengthened Imhoff, into system for nearly role forward leadership. mentioned Steve CEO competitive had CEO. the advantage Operating this a and McCormick collaboration and previous U.S., time, early Todd chain his recent further decision and Chief relationship entire our retire saw our in in partnership made same RSCS, the the entire the business tremendous a as a to leader our co-op to business. is moving provide true our At for step for the

ability of Yum! I’m bring brands ways our we incredibly our past. and and strength people culture of always haven’t the and Our has unrivaled proud together been in in a to towering talent

up, different business all sustained we the During last finance more chats for and just collaborations virtual win. our and to marketing, teams, optimistic up To have where bring we shown leaning in to a that with name we power and realize we’ve during set together. we and meetings we our are I’m planning the summit, sessions, culture programs, momentum global alike that hosted on the than few. wrap year including brands our and these are are the franchisees meetings in people to leaders with development our quarter, I’m several and fostered agility pleased a that a meetings, global It’s company-wide we ops, scale the

fueled health of demonstrate the franchise our results Our diversified the in by and global resilience are confidence strategies, of our business underlying which system. our

for for that, We poised accelerate With are our years stakeholders to you. maximize to value come. over to growth all and Chris, creation

Chris Turner

we our I’ll to X% our balance Thank sales Development grew X%, of XXX EPS, a sales record includes net X-year On and To drivers, our begin, quarter and costs by position. year-over-year closed end grew to basis, were special return Bell, increasing Favorable which points XX% negative sales items, new sheet X% a in of well QX. growth XX% franchisee was associated of growth impact delivered partially second accounts with strong $X.XX, due Taco higher to operating COVID prior and compared margin you, representing our benefit by Bell, solid Core receivable. margins David, year. driven a being Today, XXXX. everyone. operations. in increase, flow-through XXXX. profit Overall, KFC, temporarily as quarter, QX unit the offset QX of same-store ex-special good stores $X.XX as grew reserves which at results, EPS developed combination same-store was At system and growth. units. same-store excluding restaurant markets accelerated semi-variable unmatched and XX%, as of sales than capability, Restaurant as included driven discuss restaurant XX.X%, the operating commodity Bold company second growth morning, several labor Taco XX% about inflation, and year-over-year, growth for of discuss X.X the let’s liquidity in We QX the and by a at sales normal of Yum! sales

later levels mix. pressures, our day to historical increases at previous of call, a As our a toward on as expect margins increased pre-COVID staffing this and in closer return patronage historical to return with along dining inflationary given result we these our part room mentioned year restaurants

in XXXX. to by debt recoveries bad During led operating of year-over-year International. we of a representing past during tailwind quarter, operating expense see million to benefit million due, growth recoveries million $XX a related to continued QX $X profit QX, amounts profit $XX net the we resulted to KFC These lapped primarily as in

As large $XX to million expense a with COVID. bad reminder, ended we swings of debt with XXXX quarterly full-year due

second negatively and recoveries $X in bad million half in $XX QX, As impacted and such, to be growth operating million we expect the we lap respectively. as profit of year-over-year QX debt

been operating impact forecast, expenses our G&A to full-year Full-year XXXX growth be expect While is expenses and million. this still basis. General our from debt be approximately on were QX $X bad year-over-year We will don’t as increase at historically. consolidated estimate slight difficult significantly to increased $XXX the for has that G&A weighted, it profit now to a administrative back-end full-year to our we estimate attributable billion compensation. point, incentive-based expected a XXXX,

the was costs to company quarter. leverages ratio expense decrease Interest to interest We refinancing million, Our by to expect our continue our item our held charge We charge commitment elimination increase $XXX Reported XXXX, early to a $XX million, growth plan advantage the expect to the to fixed take excluding attractive special actions similar unique by million million benefits $XX a XXXX rates. during QX XXXX. of year. XX% million, efficient balances of historic of our back scale that and $XXX approximately debt conditions the still refinance interest at in continues. to to group be driven G&A to expense, ex-special, was prior $XXX sales special driven as restricted redemption of of be to ratio of recent is favorable an growth previously and mentioned toward sustained system revolver move unchanged bonds approximately X%, with market compared we expense an item related

of $XX reminder, will the be forward. As in to higher result expenditures, for this going Capital that quarter. expense expenses refranchising were net million a favorable will interest one-time proceeds,

technology with which business, prior at strategic will on still roughly we’ve investments. inherent in annual annual development fund stores. We appropriately of CapEx discussed in in calls, the needs million from refranchising, $XXX $XX store equity and proceeds strategic gross As opportunities the anticipate million least to believe the we initiatives equity earnings invest of balances

to As remodels, up maintenance, in may well a $XXX higher and million reminder, gross the XXXX, on for than slightly strategic amount as selective the CapEx repair, development we be U.S. catch as

Now, on operating to driver. growth our capability unmatched

add who any franchisees a more across It’s restaurants into other environment. experienced footprint. unrivaled by U.S. our Bell retention culture, well operated hiring is to our global which first We competing in labor in markets in market differentiates examples franchisees and focus which labor world-class relative diverse We pronounced to which start that our restaurants. and I’ll uptick company from are on leaning a Taco Our sharing facing with and winning I’ll market, competitive brands recruitment. led our employee are compete tight to are color a recruiting. by our and with have parties, some hires. known a the posted is significant

We a X the also more from apply application fast application and launched minutes. easier minutes make X reducing option time by process to the to efficient

we and retention time and experience. the a our deliver customer supported team front, economics to more to activities than variety free managing dynamics At the On a operating importance of environment the we well-positioned employee paid strong unit to a name is commodity prioritized incentives, to on off, we’ve while by cost and inflationary recognize investing and now RED ensure development people members trends. market our family unmatched our focus capability We’ve sustain few. in ever labor the including offering to maintain rewarded our related same system time, meals, increased always

domestic chain environment, costs. advantaged supply to commodity better RSCS sourcing is equipped benefits, our scale and through no co-op including our front, gives given navigate end-to-end our chain that franchisees one the cross-brand massive supply On this purchasing many there

and value markets closely while respective make of as confident customers and pressures, decisions relevant deal partner pricing in franchisees their cost pricing We with are to our power they products. also strategic still distinctive with providing with our brands the in

restaurant a are for earlier, mentioned prioritizing technology easier in it initiatives providing restaurant, an also that while operate team David members also our experience. As investments we make customer enhanced to

restaurant Their HutBot is live our Pizza significant eases fueled and increased continued [RTM], the At on coaching at front, huge app stores covering customer the X-minute QX leading management example, XX an We at is members more serving frictionless our in-house our drive-thru’s. A advantage As to we’ve experience an customer year. as by our operators better technology, are continues now speed XXXX X-seconds had to experience. and with Speed satisfaction intelligent of shout-out improvements last demonstrate cars The to increasingly XXXX adoption by X markets, to metrics. sixth excelling Hut in called teams HutBot for in quarter this continued in daily with continuing end launched X,XXX that order Taco increased quarter faster momentum of competitive of a for including evidenced delivery restaurants. Bell, the drive-thru served million for than and records the to off-premise. critical through same customers our under time. break was more consecutive demand drive-thru QX our to the our brands. of compared team International

well to win a So forward. these today. thrilled which That’s to going improvements driver, Bold Restaurant us I’m particularly position our perfect growth speak Development to segue about

Most brands Our quarter, new a broad-based was our across geographies, also in in These growth this during to speak to the only first capping of opened not America, well-capitalized year-over-year. the food and net significant builds categories units new Thailand, of primed record quarter with a a unit strength supported for half. brands growing and the XXX growth by XXX China, unit iconic growth. but quarter system during franchise X% results India, making Latin notably, healthy, record KFC net sustained contributing Russia,

has impressive emerging a momentum personalized which brand in by KFC of a International to and advantage speaks development growth this unit unit and the global footprint units first-mover Square, upon KFC share our opened As many it. quarter footprint. economics year from led the know, you strong the net that footprint and with power of the best opening India, new half delivering Pizza development This strong markets guidance, announce extremely we momentum, U.S., XX opened we’re gross during XX Pizza in by the forward units domestic net X% XX to that moderating underpin several closures. by units strength led store growth X% in and quarter, Hut China, has relative to openings positive underpinned the unit QX, the its development development sustained XXXX Asia. and grow. Hut had opened Bell all Taco from its Bell Bell Spain quarter in proud In Taco led the our X% the Taco we’re in new and new we Cantina across flagship development excited U.K. ever, digital pleased Times with to and four are by with to the experience. of to brands first Overall, net

an and Next, equivalents approximately balance consolidated capital on update our net temporarily and QX approximately target X in EBITDA priorities to approximately times, ended I’ll X.X and provide below of cash our We cash. leverage strong times. sheet allocation. $XXX liquidity restricted QX for during of drove excluding position our down with The cash recovery million,

of shares, quarter, $XXX. per X.X average totaling repurchased of at price average $XXX shares million an $XXX the During we $XXX. million at million Year-to-date, repurchased price an share of we’ve

a teams. extremely dividend, With the priorities our our of maintain to flows results, in unchanged, shareholders return agility operator, remain excess repurchases. to the competitive sheet, resilience our invest ready I’m cash pay our QX Overall, model, business and questions. the that, capital a any the are proud we Finally, of of take and business, balance healthy via remaining

Operator

Glass question from from Instructions] [Operator Please ahead. Stanley. comes John Our first go you. Morgan Thank

John Glass

I’m been sales visible target, brand I generally it a signals of playing do time though, repositioning think KFC opportunity the expect? and the on getting increase that? do U.S. How into development you or not last And basis. just domestic specifically and the in only from guidance, brand, wanted a lot the just very it’s see morning. but this on in you reinstate think that the over Thanks brand? there’s David, development I well you wondering know you’re XXXX, doing years. to, given is unit here what new pipeline Could Thanks. example? that development, become to frame specifically, to reasonable KFC the of same-store domestically, good just for And on don’t prompted specifically several about a What perspective? Chris you your

David Gibbs

Yes, pipeline John. development lot about as the the you plant XX of net months our seed have do development. the because you get new we excited And about development visibility of opening. know, a Thanks, takes obviously, to it into we’re before of

So, we’re partners build. gives world really the working get coming an unit the economics. confidence, our attractive around franchise but franchisees good, proposition the what’s with that what that that’s the increasing for all to us down pike, to with unit understand are starts our When visibility, it’s and economics our

You about that. saw night China Yum! last talk

as seeing us clarify, confidence and vast is to XXXX, would which right now, that apply unit the growth. that net world majority of And the make We’re in X% gives the new to what to to as to commitment well X% that just XXXX beyond.

KFC the on starting development. the and Bell calls. As to we far accelerate that in particularly Pizza U.S. is think as upside for past Hut, We do this there’s domestically, do think about we’ve talked Taco

shifting will every the growers be all and we Pizza but and that been went growing that in KFC there’s and we that moving, – Hut U.S., into should continue. that think they’re world XXXX and haven’t reason So the historically they in net in trend is think

Operator

go comes from question next Our ahead. UBS. from Geiger Dennis Please

Dennis Geiger

for Thanks just unit question. Great. impressive the and David that follow-up Maybe a growth Chris. acceleration, on target

to to feel longer-term over that spoke or acceleration, you. increase. you than you where additional any seeing coming few driving in of share might that brand you As brands one all insights I something over Is the few might so timing any really seeing the from, that if the next years years think be of and the more acceleration, next Chris, perhaps, how it particular it be you’re where like just to interesting others about be relates contemplated as that to there? kind curious where Thank think would

Chris Turner

Yes. Thanks, Dennis.

is north and leader. think we four all QX, for to the what across did of been engine countries growth high Just number expect in XX KFC system, you expectations system. expect look other said. we as broad-based be continue to brands, of elaborate, it we I of working brands. the leader. the at across David And work to was they in our historically to development KFC them development it if have has very a But KFC countries And in the the our

in You’re a seeing And also in Taco growth strong ahead you they where but international are Taco growth, of now running strong they with Bell domestic development. back were on Bell track saw XXXX.

to a And Pizza scale. transformation closures other our last this markets for in Pizza Hut. drive seen that to year plus asset get then made market change expect helped We Spain you’ve units, and are example, to year. you’ve We XX year accelerate in took trajectory XXX that trajectory the in this have getting Hut now seen that. strategy. and to And We change some

growth have expectations the we across high all brands. So, for

Operator

Our from question JPMorgan. from John Please ahead. next go comes Ivankoe

John Ivankoe

Thank Hi. you.

these think related are I questions. all

Thank I for the or secondly, will up units coming catch out, eight can just Your that unit a to much have the Just mean, that page? this I to actual XXXX all to XXXX, a that that year get about development am units to is or us wrong robust XXXX specific I XXXX? way now want clarification, many development want you units other full-year, the expect how you necessarily are maybe on the of that whether that net In about you same goal words, that where half XXXX, do kind it’s XXXX increase in thinking may quarter over to are from development where or about growth? of the still Is be you X% exceed or next XXXX you’ve if first catch-up XXXX? point XXXX are that will of didn’t parameter maybe opening a talk so, missed you the it. so in there X% from or talk you. And is pipeline set that combined you quarter the and and doesn’t

David Gibbs

closures And trailing some when we year. it, John. we Thanks, results to that which in quarterly XX just months last obviously clarify, the has had report

to net in X% So, XXXX. when annual now, talking we’re an starting new basis talking we’re about algorithm growth our on X% unit

for So we’re beyond. that’s and what XXXX, expecting XXXX,

will signal got general. were for that there doubt. to issuing the guidance factors on to clearly question strong put to brands – organic algorithm, in And on engine. as growth, obviously by that’s again, part world, we had certainly, on XXXX, hold because in We’ve As unit But long-term were number catch-up think with mentioned get units have into based earlier: the far around development on the we’re the units, helping we XXXX continue as trying of that the that XXXX us the no healthy that XXXX, some our restart I in franchisees. opened all economics, strong second

Operator

Bittner next Brian ahead. comes The go Oppenheimer. from from question Please

Brian Bittner

were heard Thanks. They despite Good remain International for ask what we was International in for KFC do morning. on two-year positive positive. This night, international going the last KFC to When largest below levels. from question market, my pre-COVID still the the China same-store sales turned closures, business. I’m the adjust you store your where quarter. sales

give you those maybe, So, on can us performing possible, you again if glimpse X-year basis whole to are better this a business? the KFC International? strength And how where offsetting could international a highlight relative markets seeing of are you

David Gibbs

its improvement business quarter-over-quarter The of across reflects question. strength brand about are the International KFC Great showed the X-year trends think we in the we obviously which markets. excited Yes. and

our You the that do you’ve and of running More hours, seeing of further restaurants, COVID we’re situation off-premise-ready. more are on advance customer where where recovery restrictions on those the markets for markets see where sorts in the more fewer operating state footprint those of differences each mobility business. is ahead and depending got in things developed

for like the you a recovery. longer of growth tail quarter. if so, bit The running have example, markets And of north markets XX% emerging U.K., the on incredibly in strong, look a at

what trend the that’s International over improvement in and so KFC seeing, but business. you’re general, great entire And

Operator

The next Please question comes ISI. from David Palmer from Evercore ahead. go

David Palmer

A Thanks. digital on question sales.

think from that the directly incremental. I believe ease. and be COVID the it’s an of in out XX% that’s mentioned why if growth headwinds you digital I’m interesting sales you reason was up multi-year COVID that quarter coming higher as might wondering

least I this the levels year. example, at For XX pre-COVID global higher think was points earlier order KFC at mix versus digital in

maybe we help what XXXX wondering beyond by in whenever and finally multi-year Thanks. the proving ease? you or COVID and to U.S. the I’m sales out be brands versus step-up to see growth So, do have broken digital headwinds International, biggest

David Gibbs

asked you how long-term are XX-month for I’m about a it’s glad investments as now $XX for digital. we’re track digital and billion David. been making Yes. strategy trailing for on about digital something Thanks, we Obviously, really developed sales. of excited We’ve in win to years many now.

off, that is pay this starting happened to overnight. something So not

in make people. Tictuk, investments then and us now in recently, seen You’ve Dragontrail Quantum, Quick investments like more Order, things

business So, where it’s actually now to that, the But building and that are It’s single implementing going the because from been this are the accelerated part COVID. expecting something brands. we been benefit of in to digital it’s road becoming We digital, happening. really a all of developed map by in win things digital all were very we’ve we’re to up out aspects. business is brands capability is all and most hard to the which happen our rapidly to

really it reason of smaller getting brands to that the Pizza in a brands brands the an the the You’re started can bigger on getting come, it’s digital what do. basis, widespread because why the to that other long-term seeing play. it’s a and really benefit confidently for both big loyalty growth numbers. and we algorithm. a time like international up started central of is think base they a base a first. our like long that do a part – growth that tend Obviously, customers, and But Hut to They’re are from business the we our U.S. launched reinstated with it that fuel It’s benefit,

Operator

ahead. Please question Bernstein Barclays. from from next Jeffrey comes go The

Jeffrey Bernstein

Great. Thank very you much.

respond remarks. I you or your inflationary the in are savings by which managing? how brand share next months menu model system Just terms whether I wondering outlook current good wondering pressure how and on take to hit margin maybe or broader am incremental which you how a prepared maybe the question the or insulates mentioned Clearly, commodities so? thing. you of assuming labor corporate, is outside in is both franchise the about I’m just the the XX in the over and But a a take topic, think for help was you. the are qualitatively, pricing pricing, maybe they us you or conversations to Thank understand with to incremental cost margin would there franchisees. hit can prefer guess, the franchisees suggest to I you

David Gibbs

clearly is Yes. now. a topic that top mind This of is right

pressures it of U.S. collaborating the footprint our inflationary a mark that business. our seeing topic global the our much U.S., primarily are the and are in U.S., on. represent there We outside we is XX% closely In more than in franchisees

We well-positioned this. are to deal with

in franchisees and we had than purchasing mentioned cost have scale the inflation, brands, standpoint. which in RSCS, across purchasing leverages we we capability when sourcing commodity our most First, a from the as advantaged greater players industry. the remarks, negotiating gives

are some pull think We those, that about as But dealing both with our our brands lever the seeing mentioned. and franchisees pricing. when is also we wage of inflation, you next

ahead ability how very layer the use their about And in that the very But over tactfully. and those strong say, our in we’re don’t are being actually I get deal pull are pricing analytics, across restaurants, ones this confident who levers consumer. in create menu. who smart brands have the these with in with decisions obviously, are brands, the they that been to our increased so, this. have in U.S. tend confident to too to that. thoughtful pricing we to And about thoughtful moderately make would our so deal and the mix they brands how power very of to far are the time, They franchisees, they continue do those we’ve to

Operator

Jon Fargo. ahead. Please The comes Wells from Tower go next question from

Jon Tower

you into and different Great. these across that a thought? digital up the little of higher. previously say, specifically, specifically and development suburban brands, two Thanks. mix seeing was mix ago, the just across markets development. how type digital than about to rate Is kind smaller you three future had thinking you you’re once higher of years had you’re is brands bit And impacting is in than I allowing the kind thought, this footprint that the meaning, mix following our is urban question globe at of your digital to, because ties digital on specifically versus how for penetrate it a the

Just curious to little there. get a color

David Gibbs

Yes. higher. one are orders it’s Look, experience the had have from digital things that Obviously, labor is digital. no savings check a downside. better of a There’s experience. customers average is when – you those digital processing The on

check going have right? you way. give economics less – by when pretty stickier unit clear, customers better with labor and higher and probably is check pretty the development is to link the the So, It’s associated to you

development. of starts ends think that, digital upside is, seeing you’re for also develop forward Mobile go Taco do is we which and of the to Bell is mentioned to example better of that economics. smaller economics, on new that footprint, unit all So, digital more that, and Taco franchisee brands part asset, assets our our the digital going franchisees take extent it’s we best as development with drive as Obviously, you our this as Bell improves a and and should that, give advantage unit Go

Jodi Dyer

time more have question. for we one Operator,

Operator

Okay.

from David Please Our next question Baird. from go Tarantino ahead. is

David Tarantino

question be for tied about transformation about I to next And I Pizza through several your that? would secondarily, asset there. just My is transformation, growth going and specifically then frame-up how the guidance that closings years? ask globally? can of to thinking can you the largely get that guess think the Hut transformation think about you’re you’re kind on overall Do closer brand you average on you’ve morning. assumes you that wanted been that to whether Good as growth now growth unit or that your Hi. Hut, completed And Pizza with

David Gibbs

a to by specifically, we U.S. saw closures has points. that If few last that did on of Hut through International front. percentage a Pizza a progress if Hut we it’s take modern mix system of on The and over has the COVID, last Pizza been about both move to And transformation. asset But David. few as number strategy, drive focused years, you year Thanks, Hut brand in we’ve business. our Hut revitalize talked Yes. that driving off-premise U.S. and the drove the Pizza [Delco Pizza assets] continued

progress that still is There to go. to continuing transformation. on we’re So, make further

Hut unit we XX% were So, you’ve Pizza that in actually from we’re the stem positive of Pizza U.S., International, across off-premise, [indiscernible] a in growth the XX% But which in Hut economics trajectory. both Pizza think U.S. in and unit change you’re see net think to Pizza count, this that And We the drive terms roughly strength U.S. Hut to XX% then brand. a we the going X-year to continue in reflects strong in Pizza and basis that. Hut Hut of I slightly on seen U.S. across continuing in quarter were improved International.

think work we seen is transition unit the the more think Still continuing asset we’ve on strengthening. is counts. to We go strategy on to change but brand the working. So, a trajectory in base,

performing is on wrap I that, results, all call. thank results I time what’s that want obviously, sense us the four But really for we’ll those brands that think just encouraging you are are for the everybody with And underlying up. to strong. well.

it’s we in QX, it. raised is global that being why new our which which way all well the they on up fueled a to and the trends and improved future. target. by really you great your X-year net had $X and of basis. quarter, exciting the net new all billion is obviously brands confidence guidance of lot for but it But not net units lot and business a were a all the there’s great work Those fired to basis line quarter, U.S. record it’s grow global a a We us lot unit in saw for a with sales no story, of the our The and Thanks ahead more matter team continue work that have units forward brands. a it quarter positive. how the And everybody. bodes all side XXX You annual in also up with of top the digital on-track lot They know four for for it’s and to obviously on time, come. of positive And on in we and basis reinstated the were billion of from slice a digital on to just $XX adds over the an accelerate is

Operator

The conference for concluded. presentation. today's now attending Thank has you

now disconnect. may You

Yum! Brands (YUM) 29 Jul 212021 Q2 Earnings call transcript