
Taco Bell Reports Startling News; Can Things Get Better?
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.









