Taco Bell Sales Slump Amid Cyclospora Outbreak

Yum! Brands Inc. reported its second-quarter results for the period ending June 30 — the quarter that concluded before a cyclospora parasite outbreak was linked to iceberg lettuce served at Taco Bell locations. In that quarter, Taco Bell’s same-store sales rose 7 %, making the chain the fastest-growing brand in Yum’s portfolio, while overall system sales for KFC, Pizza Hut and Taco Bell grew 3 % worldwide. The company posted net income of $853 million, up from $374 million a year earlier.

CNN

Mid-July, U.S. regulators identified lettuce supplied by Taylor Farms as the likely source of the outbreak, which the CDC says has sickened more than 1,900 people across nine states, hospitalized nearly 100 and caused no deaths. Foot traffic at Taco Bell locations fell 30 % in mid-July after the public health announcement; by July 23 traffic remained 20 % below the chain’s daily average. Through July 27, sales for the quarter were down 2 % year-over-year, according to CFO Ranjith Roy. Despite the dip, the company noted that sales declines have “moderated materially” and that trends have been improving over the last ten days.

CNN

Yum’s leadership emphasized rapid action. The chain removed lettuce from Taylor Farms immediately and launched a one-day promotion of lettuce-free items priced at $1 each. CEO Chris Turner told analysts that “the brand has seen a meaningful near-term sales impact” and that consumers now view the issue as Ben Parker of GlobalData warned that Yum’s reliance on Taco Bell makes restoring confidence “essential” for short-term growth. While Yum did not provide a formal same-store sales outlook, it reaffirmed its long-term target of 7 % system-sales growth (excluding currency effects).

Bloomberg

• “The brand has seen a meaningful near-term sales impact ,” — CEO Chris Turner

CNBC

• “Elevated uncertainty initially weighed on consumer demand, and since then, consumers have become increasingly aware that this is an industry-wide issue, not an issue specific to Taco Bell,” — Chris Turner, CEO

CNBC

• “As Yum is now more reliant on Taco Bell for growth, it is essential that the group moves quickly to restore confidence and trust in the brand – the loss of which has been considerable, at least in the short term,” — Ben Parker, an associate consulting director at analytics firm GlobalData

Bloomberg