Cyclospora outbreak weighed heavy on Taco Bell in the third quarter

Executive Editor,Nation's Restaurant News

A cyclospora outbreak led to Taco Bell's quarterly decline — just its third in 10 years. Photo courtesy of Yum Brands

Yum Brands’ third quarter results beat Wall Street’s estimates, but the company still had to contend with the July cyclospora outbreak traced back to iceberg lettuce that disproportionately impacted one of its twin growth engines in Taco Bell.

Taco Bell’s same-store sales fell 4%, marking its first quarter in the red since the pandemic period of Q2 2020. Prior to that, you’d have to go back 10 years to find another negative quarter for the chain, which represents 38% of Yum's divisional operating profit.

Further, the chain’s system sales declined 2%, while operating profit decreased 5% to $255 million, and core operating profit fell 4%.

However, executives are bullish about the chain's recovery. During Yum’s earnings call Tuesday morning, CEO Chris Turner said Taco Bell U.S. has been outpacing the quick-service industry on same-store sales growth since the end of September.

“The recovery to date has been one of the fastest … from an event like this,” Turner said, adding that consumers acquired as part of the recovery plan spend 5% more and visit 6% more frequently than consumers lost.

“We're not just bringing folks back. We're bringing a really attractive consumer set to Taco Bell. The team is leaning in and continuing to play offense through the end of the year and into the beginning of 2027.

International remained a bright spot for Taco Bell, with same-store sales up 5%. During the company’s earnings call Tuesday morning, Turner said the chain is “building relevance and scale” overseas and is translating the U.S. playbook with product launches like the Baja Blast in the United Kingdom.

Meanwhile, KFC recorded 1% same-store sales growth and 6% system sales growth as the division opened 878 restaurants across 66 countries. KFC’s operating profit increased 9% to $425 million, while its core operating profit increased 8%.

In the U.S., KFC’s systemwide sales declined 6%. The company no longer breaks out same-store sales in the market, which represents less than 5% of divisional operating profit. Turner said the chain experienced a strong consumer response to the Popcorn Chicken launch in July but lapped a successful Wings and Wedges promotion in the same period a year ago.

“More work lies ahead, and the team is taking steps to return KFC U.S. to sustainable growth,” he said.

Habit Burger & Grill delivered 3% system sales growth driven by unit growth. Same-store sales were flat.

It was a busy quarter all around for the company, which also navigated the divestiture of its Pizza Hut business. The pizza chain was sold in two separate deals, to Yum China on Aug. 7 and LongRange Capital in early September. Turner said Yum is now more focused following the sale.

“Our three brands have massive white space ahead of them,” he said. “We see massive opportunities to strengthen our growth profile. Raising the bar is about having a higher ambition as we look to the long term. We’ve got so many structural strengths behind each of our businesses.

“Battling for future consumers should help us support continued improvements in sales growth (and) accelerating restaurant economics. That's the lifeblood of development.”

Contact Alicia Kelso at [email protected]

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