Orange County Business Journal

Taco Bell U.S. Sales Fall More Than Expected

Kari Hamanaka Thursday, July 14, 2011

Irvine-based Taco Bell Corp.’s sales during the recently ended quarter continued to fall on lingering effects of a dropped lawsuit against the fast food chain.

Taco Bell, part of Louisville, Ky.-based Yum Brands Inc., is the largest restaurant operator here.

Yum Brands also owns Louisville, Ky.-based KFC and Plano, Texas-based Pizza Hut Inc.

Yum Brands' U.S. division's operating profit for the three months through June 11 was down 28% from a year earlier to $132 million.

U.S. sales of Yum Brands' Taco Bell, KFC and Pizza Hut restaurants open at least a year fell 4%, which was largely the result of a 5% fall in same-store sales at Taco Bell.

A lawsuit filed earlier this year against Taco Bell over the contents of its ground beef and higher costs of food and other items weighed on Yum Brands’ U.S. division for the recently ended quarter.

Although the lawsuit was dropped, Yum Brands had earlier warned of the potential drag on U.S. sales for the recently ended quarter.

The company hadn't anticipated "just how disappointing it would be," Yum Brands Chief Executive David Novak told analysts during the company’s recent earnings call.

“The remainder of 2011 will be challenging from a sales standpoint,” Novak told analysts, “but we expect slow improvement from the low point in the second quarter.”

Meanwhile, Yum Brands’ China division continued to grow, increasing operating profit in the recently ended quarter 25% to $182 million.