Customers care more about value in the U.S. Taco Bell, we know from the industry data that value is more important and that others are struggling with value and that Taco Bell is a value leader. You are seeing some low-income consumers fall off in the industry. We are not seeing that at Taco Bell. So, a really favorable setup for Taco Bell, which you probably can say about any environment that they operate in given the strength of the brand. And for Pizza Hut, obviously, the lapse in the quarter were unusually large. We always intend to lap anything with positive sales. We didn’t do that at Pizza Hut U.S. But we are positive on a 2-year basis and we actually did see an acceleration of Pizza Hut’s 2-year trends in Q1 versus Q4. I am excited about the calendar that Pizza Hut has for the balance of the year as well in the U.S. For KFC, it’s a different story.
The KFC brand in the U.S. has been struggling. And I think we are excited about some of the work that’s going on behind the scenes to really boldly reset the brand in the U.S. We have a great playbook for KFC, which is our global business, our international business on fire, as I talked about before, the underlying business. We know how to bring that brand to life to connect with consumers around the world, and we have to do a better job of that in the U.S. It’s a small part of our operating profit. Obviously, it doesn’t really move the needle in the Yum! growth equation, but it is something that’s a high priority for us as we move forward.
Operator: Thank you. The next question goes to Sara Senatore of Bank of America. Sara, please go ahead. Your line is open. Hi Sara, your line is open.
Sara Senatore: Sorry. First, a quick follow-up and then a question, just about the impact from the Middle East, you said it was dissipating. I was just curious if you are doing anything specific to do that like brand marketing, that type of thing, or if it’s just a matter of time. The question is about unit growth over time and sort of how that translates into system-wide sales, maybe this year and beyond. As some of these AUVs are coming in lower as you think about your long-term algorithm, how should we think about that either this year kind of hitting the long-term algorithm from a top line perspective or over time?
David Gibbs: Sure. Thank you, Sara. The first part of your question, no, I don’t think we are doing anything special. We have obviously had a lot of experience in the past being – with the global footprint we have of dealing with different issues around the world, and we have a sense for how these things recover. But everyone is different and time is usually the answer to most of those problems. As far as unit growth goes, yes, it is true that a lot of times when we are building, we are building particularly with our footprint and our emphasis on development. We are building in emerging markets which tend to have lower average unit volumes. That’s how we built the powerhouse business in China back in the day and it’s how we are building out markets like India, which tend to have lower volumes.
But we are also excited about a lot of the development agreements and new franchise partners that we are getting in Western Europe, for example, and some other markets around the world, which are much higher volume markets. And I think it will always be a mix and it will probably always tend to be lower volume than our typical average volume. And that’s fine because these are markets that tend to start out with lower volumes and grow faster than a traditional market, and we have seen that all around the world over the last few decades as Yum! has built out its footprint. Operator, we have time for one more question.
Operator: Thank you. The next question goes to David Tarantino of Baird. David, please go ahead. Your line is open.
David Tarantino: Hi. Good morning. My question is on your results in the context of the sales performance. I think you mentioned that the operating profit in Q1 was slightly better than your expectations. I was curious to know how the sales are progressing relative to the expectations you might have had when you gave the guidance originally. And then in particular, I guess was Q1 about what you expected, better than what you expected? And then secondly, David, if you could give us some sense of whether you have line of sight to global comps performance turning positive either in the second quarter or in the second half of the year. Thanks.
David Gibbs: Thanks David. Obviously, we didn’t anticipate the weather impacts in the U.S., for example, in Q1. So, it generally was in line with what we expected, perhaps just a tad weaker. But to the point of your question, as we go into Q2, as I mentioned earlier, the Taco Bell business is picking up strength. We are generally on track with our projections for the year, which is why we feel comfortable with our operating profit commitment and the long-term algorithm. But it is going to be a challenging year, and we have a great team out there on tackling the challenges. And in any one of these challenging years, it’s always an opportunity to grab market share as well. We are doing that through development with the pace of development that you are seeing.
And I will just close with a few comments about the business. We talk about this a lot, but I think this was a quarter that really demonstrated how resilient this business is and how we can navigate just about anything thrown our way. The fact that we are sitting here in this first quarter in this choppy environment and we are able to put up 6% core operating profit growth and reconfirm that 8% plus target, I think is a testament to the levers that we have to pull and the talent we have around the world. Our twin growth engines which are 80% plus of our operating profit Taco Bell U.S. and KFC International, their underlying strength of their business is obvious when you look at the 10% unit growth at KFC or you look at Taco Bell’s performance with low-income consumers in a value environment and the acceleration we are seeing in 2Q.
