Taco Bell sales rebound after lettuce outbreak, Yum! Brands says

Taco Bell's U.S. sales are recovering after a cyclospora outbreak linked to tainted shredded lettuce, according to parent company Yum! Brands, which credited a mix of loyalty deals and limited-time menu items for the turnaround.

Yum! Brands, which also owns KFC and The Habit Burger Grill, reported third-quarter earnings on Tuesday that beat analyst expectations. The results were helped in part by KFC's global expansion and higher revenue from its franchises. Taco Bell, which the company describes as its "growth engine," was a weak spot: the outbreak pulled same-store sales in the U.S. down 4% for the quarter. Because Taco Bell is so central to the company's growth strategy, the setback stood out against an otherwise strong report.

Looking ahead, however, the picture improved. On the earnings call, Chief Financial Officer Ranjith Roy said same-store sales were up about 1% for the fourth quarter so far and up 3% over the last four weeks compared with the same period a year earlier. That suggests customers have not stayed away for long. Yum! Brands attributed the rebound to what it called a "magic formula" that included weekly Tuesday deals for loyalty members and limited-time offers, a combination the company is now leaning on to keep traffic moving.

"Since the end of September, Taco Bell U.S. has been outpacing the quick-service restaurant industry on same-store sales growth," Yum! Brands CEO Chris Turner said in an earnings statement. "Taco Bell will continue building on this momentum, with differentiated value and innovation that resonate across all consumer groups." He added that the company remains confident in its ability to deliver consistent earnings growth and long-term shareholder value.

For the quarter ending September 30, Yum! Brands reported revenue up 3.8%, to $2.05 billion. Adjusted earnings per share came in at $1.56, above the Zacks Consensus Estimate of $1.47. Net income rose to $1.62 billion from $397 million a year earlier, though the company said those gains excluded its divestment from Pizza Hut, which has now been completed. Pizza Hut was acquired by LongRange Capital and Yum China Holdings. Shares of Yum! Brands (NYSE: YUM) were down 0.2% in afternoon trading on Wednesday, a modest move that suggests investors took the mixed picture in stride.

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Derek Weston

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Derek Weston covers public affairs, politics, business, culture and daily news for Core Memo. The role focuses on verification, context, and clear explanations for readers.

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