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YUM! Brands doesn't anticipate raising prices 'as much' this year: CEO

YUM! Brands (YUM) — the parent company of Taco Bell, KFC, and Pizza Hut — doesn't plan to hike prices "as much" this year as last. With inflation pinching consumers, CEO David Gibbs said price hikes are "a last resort" for the company.

"As we enter into 2023, I do not anticipate taking as much price in 2023 as we did in 2022, simply because inflation has abated for us in terms of our key input costs, on the food side, and even the labor market has gotten a lot better" with staffing levels back to pre-pandemic, Gibbs told Yahoo Finance.

Nonetheless, Gibbs said the company needs to "preserve our franchisee profitability." To that end, Gibbs said the company will maintain its value offerings while increasing prices where "customers can afford it," based on findings with AI.

Gibbs said the company is utilizing its artificial intelligence platform, Kvantum, which it acquired back in 2021, to figure out the markets where a change in prices would make the most sense. "That does a lot of in data and analytics work for our franchise partners to help figure out the right pricing constructs in markets around the world," he said. "[The] whole formula of being very smart about how we how we take price is really working for us."

NOVATO, CA - FEBRUARY 22:  Customers enter a Taco Bell restaurant on February 22, 2018 in Novato, California. Taco Bell has become the fourth-largest domestic restaurant brand by edging out Burger King. Taco Bell sits behind the top three restaurant chains McDonald's, Starbucks and Subway.  (Photo by Justin Sullivan/Getty Images)
NOVATO, CA - FEBRUARY 22: Customers enter a Taco Bell restaurant on February 22, 2018 in Novato, California. Taco Bell has become the fourth-largest domestic restaurant brand by edging out Burger King. Taco Bell sits behind the top three restaurant chains McDonald's, Starbucks and Subway. (Photo by Justin Sullivan/Getty Images) (Justin Sullivan via Getty Images)

One example of this is at Taco Bell, whose U.S. same-store sales grew 9%. The chain's $2 Cravings value menu "makes the brand accessible to everybody," Gibbs said.

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"People care a little bit more about value than they have over the last few years, maybe when they were a little more flush with money in their pocket," Gibbs said, noting the company tends to "flourish" in tough financial times, especially its Taco Bell brand, which "makes up 75% of our profitability in United States."

Other value offerings also helped bring in customers. KFC's 2-for-$5 Chicken Wraps, "really moved the needle" for the chain, Gibbs said, noting their popularity among lower-income consumers, who made up the "strongest part of their sales growth for the quarter in the U.S." KFC saw system sales growth of 3% in the U.S. in Q1 2023.

Starting Feb. 6, new Kentucky Fried Chicken Wraps will be available online at KFC.com, on the KFC mobile app and at KFC restaurants nationwide. (Courtesy: KFC).
Starting Feb. 6, new Kentucky Fried Chicken Wraps will be available online at KFC.com, on the KFC mobile app and at KFC restaurants nationwide. (Courtesy: KFC). (KFC)

Pizza Hut's value offerings, such as its newest menu item Melts, which retails for $6.99, are also gaining and bringing in "a different consumer than the typical pizza consumer," Gibbs said.

"There's no doubt that right now in the U.S. pizza market, Pizza Hut is winning and stealing share from others."

Pizza Hut U.S. saw Q1 sales increase 10%. Overall, this past quarter, similar to many fast food companies, YUM! Brands same-store sales beat estimates, up 8%, compared to expectations of just 5.76%.

"We're not seeing an environment from a consumer standpoint where we can't drive transaction growth and drive sales," he added.

On Wednesday, the day the company reported first-quarter earnings, shares closed down nearly 4%, reversing some gains made year-to-date. Share prices are now up around 7.2% from January.

Brooke DiPalma is a reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.

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