Topline
Yum! Brands, the publicly traded parent company of Taco Bell, says it’s already recovering from a sales slump driven by a cyclospora outbreak that sent foot traffic to the chain plummeting after thousands of people were sickened by eating tainted lettuce served at its restaurants.
Key Facts
Yum! Brands CEO Chris Turner on Thursday said the outbreak, linked to lettuce supplied to Taco Bell by produce giant Taylor Farms, had a “meaningful near-term sales impact” on the company but that sales trends have been “steadily improving” over the last 10 days.
He also said brand sentiment on social media has returned to pre-Cyclospora levels and reported “consumers have become increasingly aware that this is an industry-wide issue, not an issue specific to Taco Bell.”
The comments came as Yum! reported second-quarter earnings for the period ending June 30—before the outbreak hit.
Yum! Brands earnings per share beat industry expectations and the company reported net revenue climbed 12% to $2.17 billion.
Shares of Yum! were up about 4% in premarket trading.
BIG NUMBER
31%. That’s how much foot traffic to Taco Bell plummeted on July 17, the first Friday after the chain was linked to the outbreak, per Placer.ai. The broader fast-food category posted only a 1.9% traffic decline that same day, meaning Taco Bell’s drop was approximately 16 times worse than its peers.
Key background
Thousands of people had been sickened by cyclosporiasis, caused by the cyclospora bacteria, before the Food and Drug Administration linked the outbreak to iceberg lettuce served at Taco Bell. More than 1,600 of the estimated 7,000 sick people at the time—mid-July—reported eating at Taco Bell restaurants in five states. The restaurants had already stopped serving the tainted lettuce by the time the link was identified, and Taylor Farms later recalled products in 27 states. While the Taco Bell common thread is undeniable, the FDA says, it doesn’t explain all of the cyclosporiasis cases—now roughly 11,500—nationwide. To date, none of the produce the FDA has tested has produced a positive sample result for cyclospora and investigators are still working to trace what other produce may be making people sick.
SURPRISING FACT
Yum! Brands warned investors that cyclospora was a material business risk long before the active outbreak. The company listed the parasite alongside E. coli, listeria, salmonella and trichinosis as a prominent risk factor in its most recent SEC annual filing and named it as the No. 1 threat—ahead of every other business problem it predicted.
Read the full article here