Taco Bell Reports Startling News; Can Things Get Better?

Taco Bell sales not so bueno, while parent Yum! beats and its stock rises early Thursday.
By Brian Sozzi ,

Updated from July 13 with earnings call details.

Oh no, Taco Bell!

Known for remarkable sales strength due to its often craveable and affordable Mexican fare, Yum! Brands (YUM) - Get Report reported Wednesday that sales at Taco Bell's more than 6,400 U.S. restaurants fell 1% in the second quarter. A year ago, sales at the late-night fast-food stop rose a healthy 6%.

It marked the second consecutive quarterly sales slowdown for Taco Bell, and followed a meager 1% gain in the first quarter.

For Taco Bell, the stretch of sluggish sales likely reflects a broad industry slowdown in the second quarter, heightened price competition from burger players, and the continued popularity of McDonald's (MCD) - Get Report all-day breakfast.   

In a statement, Yum! Brands CEO Greg Creed acknowledged "challenging conditions" in the U.S. But, Creed did tell analysts on a call Thursday that Taco Bell's sales so far in the third-quarter are up as a result of a new $5 bundle deal. 

Shares of Yum! Brands rose as much as 5% in early trading Thursday, however, as it reported better-than-expected earnings due mostly to improved results in China and share repurchases.

The company's first-quarter earnings, excluding one-time items, rose 9% from the prior year to 75 cents a share compared to Wall Street estimates for 74 cents. Total sales fell 3% year over year to $3.01 billion, missing analyst forecasts of $3.09 billion because Yum! Brands was hurt by the strength of the U.S. dollar. Yum! Brands also hiked its full-year operating profit growth forecast from 12% to at least 14%, citing improved trends in China

Loading ...