David W. Gibbs
Chief Executive Officer and Director at Yum! Brands
Thank you, Jodi, and good morning, everyone. Our second quarter results are a testament to the resilience of our iconic brands and the power of our highly franchised business in this complex operating environment. System sales grew 5% after adjusting for the exclusion of our Russia business, driven by sustained development momentum. We opened 781 gross new units in the quarter with broad-based contributions from each of our brands. Additionally, we delivered positive same-store sales growth while lapping last year's growth of 23%, the strongest quarter of same-store sales growth in Yum!'s history. We're pleased with the continued growth in our digital business with sales of nearly $6 billion, fueled by the adoption of our global platforms and capabilities. Our unmatched global scale and digital capabilities are key differentiators in the restaurant industry, and these competitive advantages enable us to thrive in any environment. I'll now share a few global trends from the quarter.
As Yum China shared on its earnings call last week, COVID-related restrictions continued throughout the quarter, significantly impacting second quarter results. However, trends outside of China remains strong. Our consolidated same-store sales, excluding China, grew 6% for the quarter. Despite a complex consumer landscape in the U.S., Taco Bell U.S. is not yet out of the park with 8% same-store sales growth. The team achieved these results through exceptional execution of a well-balanced marketing agenda that sustained the brand buzz, distinctive product news and compelling value offerings and that was all supported by operational improvements and a focus on elevating the digital experience.
Additionally, emerging markets, excluding China, continued to recover to pre-COVID levels, driven by the reopening of dining rooms and growth in our digital business. In fact, same-store sales growth for emerging markets, excluding China, was up 22%, a 4-point acceleration from the prior quarter. We remain confident that we are well positioned to win in this environment given our iconic brands that customers love, strong consumer value proposition, scale advantages, expanded digital access and sophisticated franchise partners with unmatched operating capability. Before I provide an update on our growth drivers, I'd like to share an update on our ongoing process to exit Russia. Last month, we shared that we completed the transfer of ownership of our Pizza Hut business in Russia to a local operator who has initiated the process of rebranding locations to a non-Yum! concept. As for our KFC restaurants in Russia, we are in advanced stages of transferring ownership, operating systems and master franchise rights, including the network of franchise restaurants to a local operator who will be responsible for rebranding locations to a non-Yum! concept.
Upon the completion of this process, we will have fully exited from Russia. Our franchisees and team members in Ukraine continue to demonstrate incredible fortitude through this conflict. And I'm proud to report that nearly all of our stores in Ukraine have reopened to serve the people of Ukraine while ensuring the safety of our team members. Now I'll talk about two of our growth drivers, our Relevant, Easy and Distinctive Brands, or RED for short, and our Unrivaled Culture and Talent. Then I'll provide an update on our Recipe for Good. Chris will share the details of our second quarter financial results, including an update on our capital strategy before providing an update on our unmatched operating capabilities and bold restaurant development growth driver. Let me begin with our Relevant, Easy and Distinctive Brands. Our KFC Division, which accounts for 49% of our operating profit grew system sales 1% this quarter, driven by 3% unit growth and a 1% decline in same-store sales.
Adjusting last year for the exclusion of Russia, KFC Division system sales growth was 4%, with 7% unit growth. Continued sales weakness in China contributed to significant year-over-year pressure in the quarter. Excluding China, our same-store sales grew 7%. So China remains difficult to forecast, pressures gradually improved throughout the quarter. However, as Yum China said last week, given the recurrence of COVID outbreaks, the sales recovery will likely be nonlinear and uneven. It's been well noted that many developed markets experienced increasing macro pressures and headwinds to consumer spending this quarter. In addition, the U.S. and U.K. markets faced tough compares due to government stimulus last year.
While KFC U.S. face difficult laps from stimulus and the successful launch of the chicken sandwich platform, we're pleased to share that same-store sales growth improved sequentially throughout the quarter. However, the macro pressures were not felt consistently across all developed markets in our portfolio. For example, Australia grew system sales 7% as same-store sales growth doubled from the prior quarter. This strong demand has followed the introduction of modern menu, which highlights our uniquely craveable products and contemporary value offers. Turning to our emerging markets, which delivered remarkable results in the quarter. I'd like to highlight India, the Middle East and Latin America. In India, where system sales grew 103%, the team continued to advance their digital ecosystem and provide consumers with disruptive value offering. System sales grew 41% in the Middle East driven by accelerating digital sales that grew approximately 70% year-over-year even as dine-in sales continue to recover. The launch of Click & Collect functionalities including QR code ordering via the KFC app and several of our Middle East markets helped drive these results.
The Latin America market achieved 32% system sales growth, propelled by a well-balanced marketing strategy, including a focus on product innovation and dedication to value offerings while advancing digital capabilities following the launch of the KFC mobile app and kiosks. Our diverse global portfolio is one of the many reasons we have great confidence we're well positioned in the current environment. Turning to our Taco Bell Division, which accounts for 36% of our operating profit, system sales grew 10%, driven by 4% unit growth and 8% same-store sales growth. Taco Bell continues to fire on all cylinders as evidenced by the broad-based strength of its second quarter results.
For Taco Bell U.S., system sales grew 9%, driven by 8% same-store sales growth and 2% unit growth. Taco Bell remains a culture leader in the industry, successfully executing on its strategy to inspire and enable the world to Live Ms through innovative marketing campaigns, buzzworthy brand news, distinctive products and strong value offering. Despite significant inflation, Taco Bell maintained restaurant margins by leveraging its pricing power for premium products and craveable LTOs, while still providing consumers with everyday value through a broad range of price points such as those items featured on the Cravings Value Menu. The return of the Mexican Pizza as an LTO this quarter is a prime demonstration of these strengths.
Taco Bell's most loyal fans were granted early access, increasing the average loyalty registrations 15 times during the two days of early access and fueling 10% growth in loyalty members in the quarter. Demand for the Mexican Pizza was 7 times previous levels, reaching over 20 million pizzas sold nationwide, with some stores selling out within a week, creating a sustained positive halo for the brand. Given the overwhelmingly positive reaction from our customers, we're excited to bring back the Mexican Pizza in the fall, when it will become a permanent fixture on the menu. At Taco Bell International, system sales grew 31%, owing to 27% unit growth and 9% same-store sales growth. five of our seven European markets saw double-digit same-store sales growth, thanks to the balanced execution of everyday value and disruptive value while also continuing to grow brand awareness.
Taco Bell International is building on its development momentum and now meaningfully contributes to the division's total unit growth. Moving on to the Pizza Hut Division, which accounts for 15% of our operating profit. Q2 system sales were flat, driven by 4% unit growth and a 3% same-store sales decline. At Pizza Hut International, which represents 8% of our operating profit, system sales grew 3%, led by 7% unit growth and a 2% decline in same-store sales. As I mentioned before, COVID lockdowns in China led to sales softness in the quarter. Excluding China, Pizza Hut International same-store sales grew 6%. I'd like to highlight two of our leading markets for the quarter, India and Latin America. India system sales grew 79%, a 35-point acceleration from the prior quarter, driven by further recovery in dine-in sales and home meal replacement strength. System sales grew 18% in the Middle East, where the team has successfully executed a balanced strategy of offering everyday value and customized products, with particular success from the My Box offering.
My Box offers a compelling entry price point that is well positioned to serve the individual eater and lunch occasion and is now live in nearly 50 markets. At Pizza Hut U.S., which represents 7% of our operating profit, system sales declined 3%, driven by flat unit growth and a 4% decline in same-store sales, driven in large part by continued operational challenges in our delivery business. We made progress expanding system-wide adoption of third-party delivery as a service to help address our delivery driver capacity constraints to meet consumer demand. As of the end of Q2, approximately 55% of our U.S. locations have implemented delivery as a service, up from 40% at the beginning of the quarter. Additionally, we're leaning into our aggregator partnerships by joining third-party marketplaces, so our consumers can access our craveable food wherever they shop. As of the end of Q2, roughly 70% of eligible stores have opted into using at least one aggregator marketplace, up from approximately 45% at the beginning of Q2. Finally, the team shifted promotional focus towards compelling value to address the needs of the consumer.
Lastly, the Habit Burger Grill grew system sales 10%, driven by 15% unit growth and 4% same-store sales decline. During National Burger Month, Habit provided exclusive offers through its mobile app, resulting in a 10% increase in mobile app installed, while also highlighting its culinary-inspired innovation, which included the Spicy Green Beans, a spicy twist on its signature tempura-battered green beans. Moving on to our Unrivaled Culture and Talent growth driver. We continue to see growth of our unrivaled talent with Tarun Lal being named President of KFC U.S. and Shannon Hennessy taking on a new role as President of the Habit Burger Grill. Tarun is a prime example of growth from within, joining our organization 25 years ago and serving in various leadership positions. He is not only a best-in-class operator known for driving breakthrough results, he's also a driver of our culture. I'm confident Tarun's leadership and winning partnership mindset with our franchisees, will be an asset as we drive the next chapter of growth for the KFC U.S. business. Shannon joined Yum! a few years ago as a KFC Global CFO and immediately hit the ground running. She has a unique ability to work across functions and bring people together to solve problems, drive change and deliver meaningful results for our business.
She's also a standout culture leader with a commitment to growing talent and to advancing equity inclusion and belonging. When it comes to our Recipe for Good, we recently published our Annual Global Citizenship & Sustainability Report, which highlights our strategic investments in socially responsible growth and stewardship of our people, food and impact on the planet. The report includes updates on our key commitments, including our social purpose and how we've awarded more than $50 million in grants to nearly 30 social impact programs globally. This is accomplished through Yum's! unlocking opportunity initiative, that champions equity and inclusion, education and entrepreneurship for frontline restaurant teams and communities around the world. It reinforces our industry-leading commitment to food safety as well as our efforts to respond to customers' evolving preferences and improve the nutritional value of our menu items.
Finally, the report also highlights our environmental commitments, including our Science Based Targets to reduce greenhouse gas emissions nearly 50% by 2030 as well as a newly harmonized packaging policy across our brands that commits to moving all consumer-facing plastic packaging to be reusable, recyclable or compostable by 2025. To wrap up, our performance continues to demonstrate the power of our unmatched global scale in a challenging operating environment. Thanks to the advantages of our unrivaled talent, global development capabilities and expanding technology platforms and capabilities, our iconic brands continue to drive consistent growth. Our best-in-class teams and franchise partners are committed to serving up the most loved, trusted and fastest-growing restaurant brands in the world.
With that, Chris, over to you.
