Yum Brands is the latest high-profile restaurant chain to cry foul over the impact of geopolitical tensions in the Middle East. The company is fresh from delivering disappointing revenue for the last three months of last year. It joins the likes of Starbucks and McDonald’s, which also delivered results that fell short of Wall Street expectations.
Yum Brands Financial Results
The restaurant giant garnered $2.04 billion in sales in last year’s last quarter, falling short of the $2.11 billion analysts expected. Earnings also fell short of expectations coming in at $1.26 a share against $1.40 a share expected. Yum Brands says the Israel-Hamas war hurt its sales in the region with varying degrees of impact across Malaysia and Indonesia.
Pizza Hut, one of Yum Brands’ key units, recorded a 2% slide in same-store sales, missing the 0.6% growth that analysts expected. The unit’s same-store sales in the US shrank by 4% as international same-store sales remained flat. Pizza Hut was mostly hurt by an activist campaign that called for a boycott of its Pizza Chain after the franchisee said it gave free Pizza to the Israeli soldiers.
While KFC’s same-store sales were up by 2% in the quarter, they still fell short of Wall Street expectations for a growth of 4.7%. Taco Bell, which has always been a bright spot in Yum Brand’s portfolio, underperformed Wall Street expectations as it recorded a same-store sales growth of 3% against the expected growth of 3.8%.
Despite the slowdown in the Middle East, Yum Brands says it crossed the $60 billion system sales threshold that exceeded all aspects of the long-term growth algorithm. The restaurant chain also achieved a 10% system sales growth on broad-based strength across the globe as it opened over 4,700 new stores.
Middle East Conflict Impact
Yum Brands joins McDonald’s and Starbucks, which have also felt the brunt of the Israel-Hamas war. The two restaurant giants became the first chains to say the conflict in the Middle East hurt their sales and warned that demand in the region could wane in the future.
Starbucks has been one of the hardest hit after it came under attack and boycotts for allegedly showing support for Palestinians. The company was forced to distance itself from a tweet run by Starbucks Workers United, which represents hundreds of the chain’s unionized workers.
On the other hand, McDonald’s sales in the Middle East were hurt after some of the licensees in Israel offered discounts to soldiers. The actions triggered boycotts from customers who opposed the country’s onslaught on the Gaza Strip. The Middle East region accounts for about 2% of the chain’s total sales and 1% of total earnings.
Yuma Brands and McDonald’s are experiencing reduced sales in countries with the largest Muslim populations in Europe. The reduced demand comes from boycotts in response to campaigns that show support for Israel by the restaurant chains amid the Israel-Palestinian conflict. While slow sales growth in the regions continued in the year’s first quarter, Yum Brands expects the slowdown to taper off as the year progresses.
