Core operating profit increased 2% to $646 million, with ex-special EPS up 7% year-over-year to $1.44; reported EPS was $1.33.
Digital sales grew 18% this quarter, pushing the digital mix to a record 57%, with KFC's digital sales growing 22% and Taco Bell U.S. digital orders at 41%.
Franchise and property expenses increased by $16 million, driven by global franchise convention spend and lapping prior year bad debt recoveries.
G&A expenses ex-special increased 7% year-over-year to $274 million, including incentive compensation lapses; reported G&A was $302 million including $28 million special expenses.
Gross new unit openings totaled 871 with 386 net new units, led by KFC (566 gross openings), Pizza Hut (254), and Taco Bell (50).
Total restaurant level margins were 16.3%, down approximately 150 basis points year-over-year due to commodity cost laps and margin impact from newly acquired U.K. stores.
Yum! Brands delivered 4% system sales growth in Q2, driven by 3% unit growth and 2% same-store sales growth despite a tough consumer environment.
A $9.3 billion noncash impairment charge was recorded due to a sustained decline in stock price, reducing the carrying value of intangible assets.
Emerging markets grew top line by around 8% through both price and volume, with the highest operating income margin ever.
Inflation is expected to be about 5% to 7% for the year, with pricing increases around 1%, indicating pricing below inflation.
North America retail showed improvement excluding cold cuts and bacon, with a 2.7% decline in the latest 4-week period versus a 4% year-to-date decline.
Tariffs are expected to impact margins by approximately 100 basis points this year, with a potential full-year annualized impact of 180 basis points if tariffs remain.
The second quarter results came in line with expectations, showing an improvement in year-over-year top line performance.
Top 4 DMAs (Los Angeles, San Francisco, Houston, Phoenix) experienced outsized macroeconomic pressures in Q2, contributing to a 30 basis point reduction in system-wide same-restaurant sales.
Markets affected by macro pressures saw a significant downturn starting mid-June, punctuated by headlines and macroeconomic news.
Management remains optimistic that consumer sentiment volatility will moderate over time, which could stabilize sales.