Yum Brands posted better-than-expected quarterly profit and a rise in comparable sales on Thursday, amid concerns the growing cyclospora outbreak linked to its Taco Bell chain may weigh on near-term demand.
Taco Bell has been Yum’s main growth driver, drawing consumers with its Tex-Mex menu and affordable offerings, as rising living costs prompt many to skip dining out.
The outbreak, seen as the largest foodborne illness outbreak in the U.S. in recent years, in early July, though brand experts have downplayed any long-lasting damage to the brand.
Shares of the company fell about 1 per cent in premarket trading. They are down 6 per cent since Taco Bell was first linked to the cyclosporiasis outbreak in early July.
Foot traffic at the chain has slumped every day since July 13. It dropped 20.8 per cent on July 23, compared with the Thursday average between January 1 and July 6, according to the latest data from Placer.ai.
While Yum did not provide details on the outbreak’s financial impact, it comes as the first big test for CEO Chris Turner since he took the helm in October last year.
Investors will be looking for signs of a hit to Taco Bell’s sales when executives discuss results later in the day.
For the second quarter ended June 30, Yum’s comparable sales rose 3 per cent, compared with a 2 per cent increase a year earlier, while Taco Bell same-store sales rose 7 per cent, compared with 4 per cent a year earlier. Both figures were in line with analyst estimates, according to LSEG data.
Peer Chipotle’s CMG.N shares were up about 6 per cent premarket on Thursday, a day after it posted better-than-expected quarterly results and raised its forecast. It, however, said the third quarter could be the toughest this year after the outbreak dented consumer confidence in eating out in late July.
Yum, which is set to sell its Pizza Hut chain in a US$2.7 billion deal, also posted 2 per cent same-store sales growth for its other major restaurant chain, KFC.
The company’s quarterly adjusted earnings per share of US$1.62 beat estimates of US$1.58.
(Reporting by Neil J Kanatt in Bengaluru and Waylon Cunningham in New York; Editing by Anil D’Silva)
