Yum Brands Says It's Moving Quickly to Address Issues from Cyclospora Outbreak - 2nd Update

Dow Jones
Jul 30
 
 

Yum Brands said its teams are acting quickly and transparently to address current issues associated with the multistate cyclospora outbreak that has been linked to iceberg lettuce served at some of its Taco Bell locations.

In a call with analysts Thursday following its earnings release, Yum Brands Chief Executive Chris Turner said the safety and well-being of consumers were top priorities.

Turner said that while uncertainty around the outbreak initially weighed on demand, Taco Bell's fast and transparent action reinforced trust. Consumer sentiment is turning positive again, as the public has become more aware that cyclospora isn't specific to Taco Bell.

The outbreak has led to lower visits to the chain and dented shares since reports of cases emerged earlier this month. The brand is "still in early days of recovery," Turner added, as Taco Bell's U.S. same-store sales fell 2% to date through July 27.

The comments came as Yum reported second-quarter profit more than doubled, driven by higher sales.

For the quarter ended June 30, Yum said total worldwide system sales grew 5%, excluding foreign currency translation, in the latest period while same-store sales climbed 3%. Its Taco Bell division posted a 7% growth in same-store sales while KFC reported a 2% increase for the quarter.

For the three months ended June 30, total revenue climbed 12% to $2.17 billion from $1.93 billion. Analysts polled by FactSet expected revenue of $2.18 billion.

The company posted a profit of $853 million, or $3.08 a share, up from $374 million, or $1.33 a share, in the year-earlier period.

Stripping out one-time items, adjusted earnings were $1.62 a share. Analysts had modeled adjusted earnings of $1.58 a share.

"We delivered another strong quarter with robust same-store sales and restaurant-level margin performance," Chief Executive Chris Turner said Thursday. "Yum! will enter its next chapter as a more focused organization positioned to accelerate growth."

Last month, Yum Brands struck a $1.5 billion deal to sell the bulk of its Pizza Hut chain's global operations to private-equity firm LongRange Capital. Yum China Holdings also agreed in a separate deal to acquire Pizza Hut's mainland China business for $1.2 billion.

Yum had said the deals would allow it to focus on its better-growing Taco Bell and KFC brands.

Weeks later, the cyclospora outbreak hit Yum Brands' sales and stock.

Research firm Placer.ai, which analyzes foot traffic, estimated that visits to U.S. Taco Bell locations dropped as much as 31% about a week after those suspected cases were reported.

Officials later named produce giant Taylor Farms as the lettuce supplier, The Wall Street Journal previously reported.

As of July 24, the Centers for Disease Control and Prevention reported that nearly 2,000 people were infected with cyclospora and exposure to Taco Bell has been in nine states.

 
 

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