The parasitic diarrhea outbreak took a bite out of Taco Bell’s July sales, but it expects a solid recovery.
Chris Turner, the CEO of Yum! Brands, which owns Taco Bell, acknowledged the “current public health issue” without naming the outbreak during Thursday’s Q2 earnings call.
“We expect the sales impact to be temporary and are encouraged by a few factors,” Turner said. “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.”
Since the start of the third quarter through to July 27, Taco Bell’s US same-store sales fell 2%, Ranjith Roy, the CFO of Yum! Brands, said on the earnings call.
Taco Bell’s sales had steadily improved over the previous 10 days, Turner said, adding that its most recent Tuesday Drops — where the chain offers first-come, first-served deals — was its highest-performing in its history.
The outbreak came after a strong Q2 earnings period, during which same-store sales at the Mexican-inspired fast-food brand increased 7%.
Shares in Yum! Brands were up about 3.5% in early Thursday trading.
Cyclosporiasis summer
This summer, Taco Bell found itself at the center of a major outbreak of cyclosporiasis, a parasite that can cause explosive diarrhea. The cyclospora season typically lasts between May and August, according to the CDC, but rarely at this scale.
On July 16, the FDA said that shredded iceberg lettuce served at Taco Bell restaurants in Indiana, Kentucky, Michigan, Ohio, and West Virginia was linked to at least 1,644 cyclosporiasis cases between May 13 and July 13. Taylor Farms supplied the lettuce to Taco Bell, and subsequently recalled affected lots.
On July 28, the CDC said 6,707 cyclosporiasis cases had been reported nationwide.
On the earnings call, Roy said the peak impact was on July 18. He said average sales for the last four days, including the weekend and the first two days of the week, were ” halfway back to sales levels of the prior year.”
Turner added on the earnings call that measures of social sentiment toward the brand had returned to pre-outbreak levels.
