(Bloomberg) -- Yum! Brands Inc. jumped on Tuesday after the owner of KFC, Pizza Hut and Taco Bell maintained its profitability goal in spite of slower-than-expected sales.
The company still expects to post core operating profit growth in line with its 8% target this year. That measure rose about 10% in the second quarter, surpassing analyst expectations. The company expects its store fleet to grow by 5% this year.
Yum’s stock rose as much as 4.8% in New York trading. The shares have gained about 6% so far this year, short of the advance of the S&P 500 Index.
Earnings per share, excluding some items, were $1.35, beating the average analyst estimate.
The company’s sales, however, show the impact of consumers’ retreat from fast food and the war in the Middle East. Sales at restaurants open more than a year fell 1% in the second quarter, compared with the average estimate that the gauge would be flat. Deeper-than-expected declines at KFC and Pizza Hut drove the slump, more than offsetting growth at Taco Bell.
Yum is the latest fast-food operator to warn about increasingly cautious consumers. In response, chains from McDonald’s Corp. to Starbucks Corp. are looking to woo customers with discounts and new products. Yum said Taco Bell’s cantina chicken menu helped to drive the chain’s strength while highlighting its “always on” value focus.
The company attributed KFC’s same-store sales decline to weakness in the US and to the Israel-Hamas war, saying Malaysia, Indonesia and several markets in the Middle East didn’t improve over the quarter. Yum is among the companies whose brands have taken a hit from boycotts of American brands after the outbreak of the conflict.
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