A cyclospora outbreak linked to Taco Bell restaurants has pushed the chain's U.S. same-store sales down 2 percent in the third quarter through July 27, parent company Yum Brands reported Thursday.
"The brand has seen a meaningful near-term sales impact," CEO Chris Turner said on the company's second-quarter earnings conference call, adding that the company expects the downturn to be a temporary problem for Taco Bell.
The Food and Drug Administration first linked the parasitic outbreak to iceberg lettuce served at Taco Bell in mid-July. Daily traffic to the chain's locations plunged by double-digit percentages after that announcement, according to data from Placer.ai. CFO Ranjith Roy said on the call that the worst moment came quickly. "Since the U.S. food safety industry issue became front and center only two weeks ago, we saw maximum impact to sales over the weekend of July 18," Roy said.
Since then, sales have begun to recover. Turner said trends have been "steadily improving" over the last 10 days, and brand sentiment on social media has returned to pre-crisis levels. Roy said average sales over the last four days have already made a roughly 50 percent recovery compared with the steepest declines after the initial announcement.
Turner attributed part of the recovery to a shift in consumer understanding of the outbreak. "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," he said.
The outbreak involves cyclospora, a water-borne parasite often found on fresh produce including iceberg lettuce, herbs, and raspberries. Outbreaks are more common during warm months. The ongoing outbreak is described as the worst in recent history. Taylor Farms, the supplier of the affected lettuce to Taco Bell, has issued recalls covering a wider range of its products that include iceberg lettuce. Federal health agencies have also said they are tracking a second cluster of cyclospora cases and have not yet identified a likely source for that cluster.
Other restaurant chains have felt effects even without being directly tied to the outbreak. Chipotle Mexican Grill executives said consumers' mistrust of chains serving fresh lettuce weighed on sales in the second half of July. Chipotle's menu includes romaine lettuce and a Supergreens mix, but not iceberg lettuce.
Yum's second-quarter results, covering the period ended June 30, predate the outbreak entirely. The company does not typically provide an outlook for same-store sales growth or earnings per share for the full year or the coming quarter. Yum stock climbed 4 percent in premarket trading Thursday following the earnings call. Before Thursday, shares had fallen about 5 percent since the FDA first connected the company to the outbreak. Taco Bell is considered a core growth engine for Yum Brands, and the crisis has put that role under pressure, at least in the near term.
