Amid growing concerns about the Russia-Ukraine conflict, Yum! Brands (YUM) is close to exiting its KFC business from Russia and is on the verge of finalizing a deal with a local buyer to transfer its restaurants and franchise rights for KFC in Russia.
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Angered by the recent withdrawal of many multinational firms like McDonald’s (MCD), Starbucks (SBUX), and others, the Russian government aims to protect its economy and will exercise special powers to interject if multinational corporations (MNCs) plan to exit. The new law could also empower it to seize the local assets and sue MNCs for penalties.
Headquartered in Kentucky, Yum! Brands, Inc. is an American fast food company that operates, franchises, and licenses quick-service restaurants worldwide. The company operates in three divisions: the KFC Division, the Pizza Hut Division, and the Taco Bell Division.
KFC’s Exit Follows Pizza Hut’s Closures
Yum! Brands’ operations in Russia span over 25 years, with more than 1,000 outlets operated by independent owners under license or franchise agreements. However, Russia has a small percentage of less than 2% of all Yum! Brands locations globally as of December 31, 2021.
Earlier, in June, the company exited its Pizza Hut franchisee from Russia by selling the rights to a local owner who would rebrand the stores.
The move to exit Russia comes as an overall decision by the company to terminate operations of all company-owned restaurants, shelve any new investments and pass on related profits from Russian operations towards humanitarian efforts.
Wall Street’s Take on YUM
On July 1, BTIG analyst Peter Saleh maintained a Hold rating on Yum.
The rest of the Wall Street community is cautiously optimistic about the stock, with a Moderate Buy consensus rating based on seven Buys and nine Holds. The average Yum! Brands price target of $133.79 implies 14.03% upside potential to current levels.
TipRanks’ Smart Score
YUM scores a 9 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
Concluding Thoughts
In the wake of the impending law, which could be passed soon, Yum! Brands is following in the footsteps of numerous multinational corporations who are working to exit all operations from Russia.
However, being a small proportion of the company’s global footprint, the exit should not have any material impact on YUM’s profitability.
