Chris Turner
Chief Financial Officer at Yum! Brands
Thank you, David, and good morning, everyone. Today, I'll discuss our 2024 financial results, our balance sheet and capital strategy and our outlook for the upcoming year. Starting with the 4th-quarter. System-wide sales grew 5%, driven by 5% net-new unit growth and 1% same-store sales growth. Our top-line trends strengthened in the 4th-quarter, fueled by our twin growth engines as well as improvements in Taco Bell International and Pizza Hut International. Taco Bell's very impressive performance in the US outpaced the market significantly.
At KFC International, a sharper focus on digital engagement, everyday value platforms and disruptive value offers led to a two-point sequential acceleration in same-store sales growth in-markets outside of the Middle-East, Indonesia and Malaysia. In the Middle-East, KFC saw a strong recovery in transactions with traffic showing strong growth and same-store sales increasing by a notable percentage. By December, transactions had largely rebounded to pre-conflict levels.
In China, KFC continued to expand its market-share with these gains further accelerating in the 4th-quarter. We remain highly confident in our long-term potential in China, supported by our strong partnership with Yum China, the largest and most capable restaurant operator in the world. Turning to our cost line items, ex special G&A expenses were $319 million, reflecting a 7% year-over-year decline. Reported G&A included a $27 million special expense-related to our resource optimization project and costs for our German acquisition and Turkey termination.
Restaurant-level margins improved by-20 basis-points year-over-year to 17.6%, reflecting strong gains at both Habit and Taco Bell. As a result, core operating profit grew 12% due to higher restaurant-level margins and lower G&A spend. Ex-Special EPS for the 4th-quarter was $1.52. Moving to our full-year results, we achieved 5% net-new unit growth in-line with our long-term aspirations. Same-store sales declined 1% for the year, impacted by broader global consumer sentiment, particularly in-markets affected by the Middle-East conflict. Ex special G&A was $1.1 billion, down 6% year-over-year. Through our resource optimization program, we aim to drive greater efficiencies, enhance collaboration across the organization and eliminate duplicative work across brands. As a result, we removed approximately $25 million in G&A expenditures in 2024, translating to $50 million on an annual basis, some of which we flowed to the bottom-line and some we reinvested into organizational capabilities that drive future growth.
As we transition to a more streamlined digital and technology organization with increased productivity and as we continue to deploy our capabilities across our system, we're bending the curve on the net P&L impact of our digital and technology investments. Shifting to restaurant profitability, total restaurant-level margins stood at 16.8% with Taco Bell achieving 24.3%, its second-highest full-year margin rate behind 2020. Habit restaurant-level margins improved to 10%, rising 150 basis-points year-over-year and over 500 basis-points relative to 2022.
Notably, despite higher labor rates in California, habits labor costs as a percentage of company sales decreased 150 basis-points year-over-year, thanks to strategic labor model enhancements and process optimization. As a result of these moves and the hard work of our teams, we achieved core operating profit growth of 8%, a strong result given the macroeconomic challenges. This reflects the resilience of our multi-brand global franchise business model. Our effective tax-rate ended the year at 23.5% outside of our previously communicated range of 21% to 23% due to higher tax expense on the gain realized when we sold our investment in Debiani in 2024.
This profit growth drove a 4% increase in EPS to $5.39, excluding special items and the 53rd week impact, but including a higher year-over-year tax-rate impact of $0.19 as well as an additional $0.18 headwind due to the combined impacts of year-over-year Deviani net investment losses and current year foreign currency translation headwinds. Moving on to our robust development engine, we opened over 1,800 new units in Q4 and more than 4,500 for the year, reinforcing the strong investment appeal of our brands and the high confidence of our franchise partners in the long-term growth potential of our brands. KFC led the way, opening a record nearly 2,900 new units this year across 97 countries with 16 markets opening 25 or more stores. This year, the brand saw its highest-ever store openings with record builds in China, South Africa, Japan, the Philippines, Italy and Chile. At Pizza Hut, the team opened 512 units in Q4 and 1,280 for the year, driven by expansion in China, India, Saudi Arabia and Canada. In-line with our modernization efforts, Pizza Hut introduced a new US restaurant design concept in November, replicating elements of its successful digital forward model from international markets. This format aligns with evolving consumer expectations by featuring an open kitchen, self-access pickup cabinets and a digital drive-thru with a streamlined menu of high-demand items. Taco Bell continued its expansion, adding 347 new units, including 234 in the US and 113 internationally.
Turning to the Middle-East, specifically, the resilience of our business in the region is evidenced by the fact that we opened 171 new stores in 2024 across our KFC and Pizza Hut brands, excluding Turkey, thanks primarily to our largest partner in that region, Americana. On a net-new unit basis globally, in total, we delivered 1,301 net-new units in the quarter and 2,757 for the year, reflecting the strength of our gross openings, partly offset by an uptick in closures of primarily low-volume, low royalty stores tied to underperforming markets.
Nothing is more important than maintaining high standards and protecting the reputation of our brands. In this regard, last month, we terminated our franchise agreements in Turkey and reacquired the master franchise rights for Germany, which will result in the removal of 284 KFC and 254 Pizza Hut stores in Turkey from our unit count in Q1. From time-to-time, we remove franchisees from our system when they cannot meet our standards. In those situations, the closing units are typically well below our system average AUVs. As a result and as was the case with Turkey, the financial impact is typically not significant to our ongoing financial performance from such terminations. These transitions create long-term opportunities for new growth-minded franchise partners and we are actively searching for the right 3C franchise partner to reopen the turkey market and drive future success.
As a reminder, we had a similar situation in Saudi Arabia in 2020, and that market is now seeing strong growth. I'll now discuss our connected brand strategy that continues to revolutionize digital and technology across our system, strengthening operations, enhancing consumer experiences and unlocking new insights. Through Bite, we are making significant strides across our easy experiences, easy operations and Easy Insights pillars, paving the way for a more connected, data-driven and efficient future.
We continue to focus on delivering frictionless consumer experiences under our Easy experiences pillar. In 2024, we made excellent progress deploying our Byte digital ordering platform, formerly the Yum Commerce platform. Taco Bell, KFC and Pizza Hut in the US are all now powered by our Byte digital ordering products with Pizza Hut US substantially completing its transition in Q4. We also migrated three Pizza Hut international markets, including the UK onto the Byte digital ordering platform in 2024.
In the UK, the platform facilitated over 50% digital transaction growth on the app channel and drove faster processing times than the previous system. In 2025, we plan to expand our Byte digital ordering platform to five additional markets while introducing AI-driven personalization and our omnichannel loyalty software. The Byte digital ordering platform and its seamless connection with our Byte restaurant technologies make it easier for consumers to place digital orders while reducing complexity for our team members. Within EZ operations, we empower franchisees with our best-in-class bite restaurant management platform to enhance efficiency and optimize operations. In 2024, we more than doubled the number of stores using Bite's restaurant Coach mobile app, formerly Super app to over 20,000 KFC and Pizza Hut locations across 120 countries. This mobile app simplifies routine audits and operations and is the scale platform we will use to deliver AI-driven recommendations to our team members.
Meanwhile, our Bite kitchen and delivery system, formerly Dragontail is now live in over 8,000 restaurants across multiple markets with full implementation planned for KFC US and Pizza Hut US in 2025 and continued expansion globally. At Taco Bell US, we continue to launch our Bite back-of-house technology formerly tracks restaurant management system and reached over 1,500 restaurants in 2024 with plans to scale it across the entire system in 2025.
Lastly, I'll discuss our Easy Insights pillar. Our AI and data-driven approach is redefining how we engage with consumers. Our rich hub of transactional detail is combined with operations data, guest experience data and consumer data to power our AI strategies. One area we continue to be excited about is AI-driven marketing to enable hyper-personalized messaging and experiences.
Already, our US brands are leveraging AI to execute targeted campaigns with early tests on email promotions resulting in a doubling of consumer engagement compared to traditional approaches. This breakthrough is just the beginning. We expect to scale AI-driven personalization across all brands and digital channels, creating more relevant and engaging consumer interactions. With Bite's rapidly expanding capabilities, we are building an intelligent integrated digital platform that strengthens our brands, enhances consumer experiences and empowers our franchisees. As we scale these innovations, we are confident they will drive long-term growth, deeper consumer connections and a more efficient operating model across our global system. The future is digital and we are leading the way.
Next, I'll provide an update on our balance sheet and liquidity position. Net capital expenditures for 2024 totaled $208 million, reflecting $49 million in refranchising proceeds and $257 million in gross capital expenditures, in-line with our commitment to deliver shareholder value, today, we announced an increase in our quarterly dividend to $0.71 per share. Throughout the year, we repurchased approximately 3.3 million shares for a total of $440 million. Combining dividends and share buybacks, we returned $1.2 billion to shareholders in 2024. Our net leverage ratio ended the year at 4.0 times with our debt balance remaining largely unchanged.
Given our continued confidence in Yum's future trajectory and that our leverage has drifted lower by a full turn, we plan to deliver materially higher capital returns going-forward than in the past two years. Specifically, and subject to-market conditions, we expect to stop deleveraging and maintain our net leverage ratio at approximately four times over the medium-term by issuing incremental debt as our business grows. Overall, our capital priorities remain unchanged and focus on maximizing shareholder value through strategic investments in the business, maintaining a strong and flexible balance sheet, offering a competitive dividend and returning excess cash to shareholders. Looking ahead to 2025, we remain confident in our long-term growth trajectory while acknowledging some near-term headwinds. Our Q1 unit growth will reflect the 538 units exited in Turkey.
We will also, in Q1 move forward with expediting closures of a number of Pizza Hut restaurants in a few markets, resulting in an incremental 200 closures. Despite the resulting decline in our unit count during the first-quarter relative to the end of 2024, we expect full-year unit growth in 2025 to reach at least 4% or 5% when excluding the one-time turkey-related closures. As always, our unit growth is more heavily weighted to the 4th-quarter. We anticipate same-store sales performance will improve in many markets, supported by stronger value perception scores and an ongoing sales recovery in-markets affected by the Middle-East conflict and we anticipate another strong year of sales performance at Taco Bell US. We expect G&A to increase by a low-single digit percentage, excluding the headwind from the reset of below target incentive compensation experienced in 2024, including this one-time headwind and assuming an on-target bonus expense, we expect G&A to increase by a mid-single-digit percentage in 2025.
We are pleased to share that this G&A profile, coupled with the previously mentioned unit and sales growth drivers, leads us to plan another very strong year of core operating profit growth, delivering on our long-term algorithm target of 8%. Turning to items impacting net income, excluding the impact of the previously mentioned potential incremental debt issuances, we expect interest expense to fall between $500 million and $520 million. Regarding our expected tax-rate, we, like other multinationals are seeing ongoing increases in foreign income tax rates and are increasing our forecasted range for taxes to 22% to 24%. In summary, we are optimistic about the year ahead with strong brand momentum across our portfolio as we enter 2025.
As Matt mentioned, we're thrilled to host Taco Bell's Consumer Day in New York City on March 4, where we will showcase Taco Bell Live Moss Live and unveil the brand's ambitious growth plans. Originally scheduled for an earlier date, we decided to reschedule this event to prioritize the safety and well-being of Los Angeles residents affected by the devastating California wildfires and to avoid distracting from the ongoing recovery and rebuilding efforts in that community. With that, operator, we are ready to take any questions.
