US health officials say nearly 2,000 people reported eating Taco Bell before becoming ill in the cylospora outbreak.
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New York —
Taco Bell’s parent company, Yum Brands, reported robust sales and profit in the second quarter. But more recent sales took a hit after the cyclospora outbreak plunged the company’s most important brand into a food-safety crisis
Sales at Taco Bell have fallen 2% from the end of June through July 27, executives said an earnings call Thursday. The sales impact bottomed out on Saturday, July 18, shortly after US health officials identified the chain in their investigation
Yum Brands’ stock, which has fallen about 8% since Taco Bell was linked to the outbreak, initially slipped in pre-market trading but turned positive after the earnings call
The earnings covered the April-June quarter, or the three months before the outbreak. Yum Brands reported $853 million in net income, more than double the $374 million from the same quarter a year ago. Sales from all KFC, Pizza Hut and Taco Bell stores open at least one year grew 3% worldwide. For Taco Bell, the company’s growth engine in recent years, sales at existing locations grew 7%
CEO Chris Turner kicked off the earnings call Thursday morning by acknowledging the US outbreak’s hit to the business, while noting he expects the sales impact to be temporary
“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.”
Turner said sales have improved steadily over the past 10 days thanks in part to short-term promotions such as $1 “Tuesday drops” that have remained popular during the cyclospora outbreak
“Taco Bell remains the star of the show,” said Ben Parker, associate consulting director at GlobalData, in a note. But given Yum Brands’ reliance on Taco Bell for growth, he added, “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.”
More than 1,900 people across nine states became ill after eating at Taco Bell, according to the US Centers for Disease Control and Prevention. Nearly 100 people have been hospitalized, and no deaths have been reported
Taco Bell moved quickly earlier this month to minimize the damage from the outbreak. The chain has said that it immediately removed lettuce from Taylor Farms, the supplier US officials identified as the likely
Foot traffic to Taco Bell tumbled 30% in mid-July after federal health officials publicly identified the chain as part of the investigation into the parasite, according to data from Placer.ai. As of July 23, traffic had improved but was still 20% below its daily average
To win back customers, Taco Bell last week rolled out those one-day promotion of lettuce-free menu items for $1 each. Its CEO Sean Tresvant also posted a carefully worded personal message on LinkedIn, thanking loyal customers who’ve expressed support and promising to “always act quickly and put safety first.”
The crisis is a rare stumble for Taco Bell, which in recent years has been the shining star of the fast-food business. In the first three months of this year, sales at stores open at least a year rose 8% from the same period last year. McDonald’s sales, by comparison, grew 3.8% in that time. Burger King’s rose 5.8%. Wendy’s fell 2.1%
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