Key facts
- Yum Brands reported Q2 adjusted earnings per share of $1.62, exceeding analyst expectations of $1.58.
- Overall comparable sales for Yum Brands increased by 3% in the second quarter.
- Taco Bell's same-store sales rose by 7% in the second quarter.
- A cyclospora outbreak linked to Taco Bell led to a 2% drop in U.S. same-store sales for the chain in early July.
- The company anticipates a temporary sales impact from the outbreak and expects a solid recovery.
Yum Brands surpassed analyst expectations for its second-quarter earnings and sales, with its Taco Bell division showing robust growth. However, the company acknowledged that a cyclospora outbreak, linked to contaminated lettuce served at Taco Bell, has had a 'meaningful' impact on the chain's July sales.
CEO Chris Turner stated that the sales impact is expected to be temporary, noting that consumers are increasingly aware the issue is not specific to Taco Bell. Since the beginning of the third quarter through July 27, Taco Bell's U.S. same-store sales fell 2%. Despite this, Turner indicated that sales have been recovering, with a recent promotional event being the chain's most successful ever.
The outbreak, which typically occurs between May and August, saw the FDA link shredded iceberg lettuce supplied by Taylor Farms to at least 1,644 cases of cyclosporiasis between May 13 and July 13. By July 28, the CDC reported a total of 6,707 cases nationwide. CFO Ranjith Roy noted that the peak sales impact occurred on July 18, with average sales for the subsequent four days recovering significantly.
In the second quarter, Taco Bell's same-store sales increased by 7%, a notable improvement from 4% in the same period last year. Overall Yum Brands comparable sales grew 3%. Shares of Yum Brands rose approximately 3.5% in early trading on Thursday.