Updated 3 - Yum China states that after the outbreak of cyclosporiasis impacted third-quarter sales, Taco Bell has begun to recover.

Paragraph 7 adds analyst comment.

Neil J Kanatt

Reuters, November 3 - Yum Brands (YUM.N) said that Taco Bell’s third-quarter same-store sales fell more than expected after a cyclospora outbreak across multiple states hit the Tex-Mex chain’s customer traffic, but sales are now rebounding.

Taco Bell has been rolling out value deals such as combo meals to attract U.S. consumers affected by inflation. Executives said during the earnings call that these deals helped appeal to lower-income households.

According to Placer.ai data, the brand was first linked (link) to the outbreak in early July, and during the peak, weekly visits to its stores fell by as much as 20%.

The U.S. health department announced last month (link) that the outbreak was over.

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Yum Brands said promotions and partnerships tied to its loyalty program are helping bring customers back, adding that so far this quarter, Taco Bell’s same-store sales are up about 1%.

“Customers are actually spending 5% more than those we’ve lost, and their visit frequency is 6% higher,” CEO Chris Turner said.

The company completed its divestiture of Pizza Hut stores in September (link), with its share price remaining flat.

Morningstar analyst Ari Felhandler said: “We believe that as inflationary pressures persist, consumers will continue to focus on value, and Taco Bell is well positioned to meet that demand.”

According to data compiled by the London Stock Exchange Group (LSEG), Taco Bell’s same-store sales fell 4% this quarter, the first drop in about six years and steeper than the 0.9% decline analysts had expected.

Focus on value also helped Burger King parent Restaurant Brands International (QSR.N) beat sales expectations last week. Main rival McDonald’s (MCD.N) is set to report quarterly results on Wednesday.

Yum Brands’ overall same-store sales were unchanged from a year earlier, below the 0.9% gain the market expected. KFC’s same-store sales rose 1%, below the 2.1% increase expected by the market.

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Yum Brands’ adjusted earnings per share fell 1.3% to $1.56, but topped the $1.49 expected.

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