Fast-food company Yum! Brands (NYSE:YUM) fell short of the market’s revenue expectations in Q1 CY2025, but sales rose 11.8% year on year to $1.79 billion. Its non-GAAP profit of $1.30 per share was 1.4% above analysts’ consensus estimates.

Is now the time to buy Yum! Brands? Find out in our full research report.

Company Overview

Spun off as an independent company from PepsiCo, Yum! Brands (NYSE:YUM) is a multinational corporation that owns KFC, Pizza Hut, Taco Bell, and The Habit Burger Grill.

Sales Growth

A company’s long-term sales performance is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years.

With $7.74 billion in revenue over the past 12 months, Yum! Brands is larger than most restaurant chains and benefits from economies of scale, enabling it to gain more leverage on its fixed costs than smaller competitors. Its size also gives it negotiating leverage with suppliers, allowing it to source its ingredients at a lower cost. However, its scale is a double-edged sword because there is only so much real estate to build restaurants, placing a ceiling on its growth. To expand meaningfully, Yum! Brands likely needs to tweak its prices, start new chains, or enter new markets.

As you can see below, Yum! Brands grew its sales at a tepid 5.6% compounded annual growth rate over the last six years (we compare to 2019 to normalize for COVID-19 impacts) as it barely increased sales at existing, established dining locations.

This quarter, Yum! Brands’s revenue grew by 11.8% year on year to $1.79 billion but fell short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 6.4% over the next 12 months, similar to its six-year rate. This projection is underwhelming and implies its newer menu offerings will not catalyze better top-line performance yet. At least the company is tracking well in other measures of financial health.

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Restaurant Performance

Number of Restaurants

Yum! Brands sported 60,507 locations in the latest quarter. Over the last two years, it has opened new restaurants at a rapid clip by averaging 5.1% annual growth, among the fastest in the restaurant sector. Furthermore, one dynamic making expansion more seamless is the company’s franchise model, where franchisees are primarily responsible for opening new restaurants while Yum! Brands provides support.

When a chain opens new restaurants, it usually means it’s investing for growth because there’s healthy demand for its meals and there are markets where its concepts have few or no locations.

Same-Store Sales

The change in a company's restaurant base only tells one side of the story. The other is the performance of its existing locations, which informs management teams whether they should expand or downsize their physical footprints. Same-store sales is an industry measure of whether revenue is growing at those existing restaurants and is driven by customer visits (often called traffic) and the average spending per customer (ticket).

Yum! Brands’s demand within its existing dining locations has been relatively stable over the last two years but was below most restaurant chains. On average, the company’s same-store sales have grown by 1.8% per year. This performance suggests it should consider improving its foot traffic and efficiency before expanding its restaurant base.

In the latest quarter, Yum! Brands’s same-store sales rose 3% year on year. This growth was an acceleration from its historical levels, which is always an encouraging sign.

Key Takeaways from Yum! Brands’s Q1 Results

It was good to see Yum! Brands slightly beat analysts’ same-store sales and EPS expectations this quarter. On the other hand, its revenue missed. Overall, this was a mixed quarter. The stock traded down 1.4% to $145.45 immediately following the results.

The latest quarter from Yum! Brands’s wasn’t that good. One earnings report doesn’t define a company’s quality, though, so let’s explore whether the stock is a buy at the current price. The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.