Yum Brands disclosed third-quarter financial results on Tuesday that surpassed Wall Street expectations, though the company’s performance was affected by a foodborne illness outbreak linked to iceberg lettuce at Taco Bell. The company reported net income of $1.62 billion, or $5.92 per share, compared with $397 million, or $1.41 per share, in the year-ago period. Excluding gains from the divestiture of Pizza Hut and other items, adjusted earnings reached $1.56 per share. Net sales climbed 4% to $2.05 billion.
The outbreak created a temporary headwind for Taco Bell, the restaurant operator’s primary growth driver, which saw same-store sales decline 4% during the quarter as diners reduced their visits due to the health concern. Yum noted that the weekend of July 18 marked the most severe impact to sales. However, the chain has since recovered substantially. For the fourth quarter to date, Taco Bell’s same-store sales advanced approximately 1%, while the most recent four-week period showed growth of 3% compared with the year-ago timeframe. Company leadership indicated that the chain is now outpacing the broader quick-service restaurant industry on same-store sales growth.
The recovery was bolstered by strong engagement from Taco Bell’s most loyal customers, who returned promptly following the outbreak. The company implemented weekly Tuesday deals for loyalty program members to encourage repeat visits. Traffic from casual and occasional diners has rebounded to roughly 95% of prior levels, while visits from heavy users have normalized. To attract additional customers, Taco Bell pursued collaborations such as a limited-edition pink-colored Mountain Dew Baja Blast with pop singer Olivia Rodrigo. Taco Bell’s international operations reported same-store sales growth of 5%.
KFC, another major Yum brand, posted same-store sales growth of 1%, driven by gains in China and Europe. However, the United States market, now KFC’s third-largest by system sales, contracted 6% during the quarter. The chicken chain launched a limited-time popcorn chicken offering that sold out in numerous locations, though this proved insufficient to offset the performance of a previous year’s promotion for Hot & Spicy Wings and Potato Wedges. Management outlined plans to enhance KFC’s positioning through new brand identity elements, expanded menu offerings including upgraded sauces and beverages, and promotional campaigns as part of an effort to establish it as the most contemporary chicken quick-service restaurant globally.
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