July 30 (Reuters) – Yum Brands posted better-than-expected quarterly profit and a rise in comparable sales on Thursday, amid concerns the growing cyclospora outbreak linked to its Taco Bell chain may weigh on near-term demand.
Taco Bell has been Yum’s main growth driver, drawing consumers with its Tex-Mex menu and affordable offerings, as rising living costs prompt many to skip dining out.
The outbreak, seen as the largest foodborne illness outbreak in the U.S. in recent years, in early July, though brand experts have downplayed any long-lasting damage to the brand.
Shares of the company fell about 1% in premarket trading. They are down 6% since Taco Bell was first linked to the cyclosporiasis outbreak in early July.
Foot traffic at the chain has slumped every day since July 13. It dropped 20.8% on July 23, compared with the Thursday average between January 1 and July 6, according to the latest data from Placer.ai.
While Yum did not provide details on the outbreak’s financial impact, it comes as the first big test for CEO Chris Turner since he took the helm in October last year.
Investors will be looking for signs of a hit to Taco Bell’s sales when executives discuss results later in the day.
For the second quarter ended June 30, Yum’s comparable sales rose 3%, compared with a 2% increase a year earlier, while Taco Bell same-store sales rose 7%, compared with 4% a year earlier. Both figures were in line with analyst estimates, according to LSEG data.
Peer Chipotle’s shares were up about 6% premarket on Thursday, a day after it posted better-than-expected quarterly results and raised its forecast. It, however, said the third quarter could be the toughest this year after the outbreak dented consumer confidence in eating out in late July.
Yum, which is set to sell its Pizza Hut chain in a $2.7 billion deal, also posted 2% same-store sales growth for its other major restaurant chain, KFC.
The company’s quarterly adjusted earnings per share of $1.62 beat estimates of $1.58.
(Reporting by Neil J Kanatt in Bengaluru and Waylon Cunningham in New York; Editing by Anil D’Silva)
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