Taco Bell CEO: "Magic formula" will overcome sales slump from cyclospora outbreak
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A Taco Bell restaurant in Pasadena, California, on July 14. Photo: Mario Tama/Getty Images)
Taco Bell sales have fallen sharply since the national cyclospora outbreak, but the company's executives said they're already noticing signs of a rebound.
Why it matters: Health officials have identified more than 11,000 confirmed or suspected cases of the parasite, which can cause "explosive" diarrhea.
Driving the news: Executives at Yum Brands, which owns Taco Bell, said the chain's sales are down 2% in the quarter, compared with a year earlier — noting that the quarter began in mid-June, about a month before the outbreak began.
- "The brand has seen a meaningful near-term sales impact," Yum CEO Chris Turner said Thursday on an earnings call. But "we expect the sales impact to be temporary."
- Turner said Taco Bell is still in the "early days of recovery," but contended that its "magic formula" of "brand buzz, innovation, value and digital" will prove resilient.
Zoom in: Taco Bell removed lettuce from Taylor Farms from its menu soon after the outbreak began.
- Executives did not say Thursday whether they would continue doing business with the supplier. Taylor Farms said "we are confident in our food and food safety systems and will continue to be transparent as more information becomes available."
- "The safety of our consumers is our highest priority," Yum CEO Turner said Thursday. "Our teams are acting quickly and transparently while keeping the safety and wellbeing of our consumers as the top priority."
- He added that "consumers have become increasingly aware that this is an industry-wide issue, not an issue specific to Taco Bell."
Taco Bell has been the crown jewel of Yum's lineup in recent years, consistently delivering sales growth.
- But "the past two weeks have brought the brand's momentum — which seemed accelerated through the year — to a sudden halt," Bank of America analyst Sara Senatore wrote Monday in a research note.
- Foot traffic data from Placer.ai showed a steep dropoff.
- "Franchisees we've spoken with — some of whom have been in the system for decades — seem to be coalescing around an expectation that the pressure lasts at least through the end of this year," according to Senatore.
The impact: Yum Brands shares rose 4% in pre-market trading Thursday after the company reported a worldwide same-store sales increase of 3% for its entire lineup.
