Yum Brands reported that a cyclospora outbreak connected to Taco Bell restaurants has created a meaningful near-term sales impact for the chain. The parasitic outbreak, which the Food and Drug Administration linked to iceberg lettuce served by Taco Bell in mid-July, has resulted in significant traffic declines at locations. Through July 27 in the current quarter, Taco Bell’s U.S. same-store sales have fallen 2%, with daily traffic plunging by double-digit percentages according to tracking data.
CEO Chris Turner indicated that the downturn should be temporary, noting that sales trends have been steadily improving over the last 10 days. According to Chief Financial Officer Ranjith Roy, the maximum impact to sales occurred over the weekend of July 18, and average sales over the last four days have recovered approximately 50% compared with the steepest declines following the initial announcement. Turner stated that consumer awareness has grown regarding the issue being industry-wide rather than specific to Taco Bell.
Taylor Farms, the lettuce supplier to Taco Bell, has issued broader recalls of its products including iceberg lettuce. Federal health agencies are also tracking a second cluster of cyclospora cases and have not yet identified a source. Other restaurant chains have experienced sales effects as well, with Chipotle Mexican Grill executives noting that consumer mistrust of chains serving fresh lettuce weighed on sales in late July, despite Chipotle’s use of romaine lettuce and other alternatives.
Yum’s second-quarter financial results, reported for the period ended June 30 before the outbreak was announced, showed the company earned $3.08 per share with net income of $853 million, up from $1.33 per share and $374 million a year earlier. Excluding strategic review charges and other items, the company earned $1.62 per share. Net revenue climbed 12% to $2.17 billion. Global same-store sales rose 3%, with Taco Bell posting 7% growth prior to the outbreak impact. KFC reported 2% same-store sales growth, while Pizza Hut declined 1%.
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