LOUISVILLE, KY. — Digital sales and automation rose in importance at Yum! Brands in the fiscal year ended Dec. 31, 2023, while same-store sales, excluding foreign currency translation, increased 6%. The Middle East crisis, however, began to affect KFC and Pizza Hut negatively in the fourth quarter.

Net income of $1.60 billion, equal to $5.68 per share on the common stock, was up 23% from $1.33 billion, or $4.63 per share, in the previous fiscal year. Net revenues were $7.08 billion, up 3% from $6.84 billion.

Digital sales increased 22% year-over-year with digital mix exceeding 45%, said David W. Gibbs, chief executive officer of Yum!, in a Feb. 7 earnings call.

“At the same time, we have accelerated the deployment of our proprietary technologies to optimize back-of-house operations and make it easier to run our restaurants,” he said.

Automated inventory management driven by artificial intelligence (AI) is being used in 90% of KFC US restaurants and about half of Taco Bell US restaurants, said Christopher L. Turner, chief financial officer. More than 3,000 additional restaurants across KFC, Taco Bell and Pizza Hut will be onboarded to the automated inventory management system in 2024.

Same-store sales increased 7% at KFC for the year. In the fourth quarter, sales trends decelerated in several markets because of the Middle East conflict, Gibbs said. In the United States, KFC sales were flat in the fourth quarter. Planned first-quarter initiatives include a Smash’d potato bowl and KFC’s first loyalty rewards program.

Same-store sales increased 2% at Pizza Hut in the year, but sales trends in the fourth quarter decelerated in several markets because of the Middle East conflict. In the United States, same-store sales increased 1% for the year and decreased 4% in the fourth quarter.

“The Melts launch and the promotion of the Detroit-style pizza in the prior year contributed to a difficult lap this quarter,” Gibbs said. “Pizza Hut US will face another challenging lap in Q1 as same-store sales increased 8% last year, reflecting a full quarter of sales from the Melts platform and the Big New Yorker.”

Same-store sales rose 5% at Taco Bell. Loyalty program users increased 17%, Gibbs said. McDonald’s saw a decrease in its low-income consumers in the fourth quarter, according to the company’s Feb. 5 conference call, but Taco Bell has not experienced that problem, Gibbs said.

“It looks like we're doing a great job of holding on to them, and in fact, in both the entire year and in Q4, we saw the low-income consumer trade areas outperform the rest of the business, and I think that speaks to the strength of Taco Bell in this environment,” he said. “(Taco Bell) is a value leader in so many ways.”

In the fourth quarter, net income of $463 million, or $1.65 per share on the common stock, at Louisville-based Yum! was up 25% from $371 million, or $1.31 per share, in the same time of the previous year. Fourth-quarter revenues increased 1% to $2.04 billion from $2.02 billion.

“During the quarter, top-line sales were impacted by the conflict in the Middle East region with varying degrees of impact across markets in the Middle East, Malaysia and Indonesia,” Gibbs said. “This represented a low single-digit headwind to Yum!'s overall fourth-quarter same-store sales growth.”