Ahead of Yum's quarterly earnings, investors are focused on double-digit traffic declines at Taco Bell and whether the food-safety scare will weigh more heavily on the second half of the year.
Yum Brands is due to report second-quarter earnings before the bell on Thursday, but investor attention has shifted to the cyclosporiasis outbreak tied to Taco Bell and the pressure it may put on sales in coming quarters. Since the Food and Drug Administration first linked the outbreak to lettuce served at some Taco Bell locations, daily traffic to the chain has fallen by double digits, according to Placer.ai, while Yum shares have dropped 5%, cutting its market value to about $42 billion. The outbreak has sickened at least 1,947 people and led to 98 hospitalizations, with no deaths reported as of Friday, according to the Centers for Disease Control and Prevention. Federal health agencies have identified iceberg lettuce supplied by Taylor Farms as the likely source. Taco Bell removed the affected lettuce by July 17, and CEO Sean Tresvant later issued an open letter promising to put safety first and act with transparency as the chain tries to rebuild trust. The episode matters disproportionately for Yum because Taco Bell is one of the company's "twin growth engines" alongside KFC's international business. Wall Street expects Yum to report earnings of $1.58 per share on $2.2 billion in revenue for the quarter, with Taco Bell projected to post 7% same-store sales growth in a period that ended before the outbreak was linked to the chain. Analysts now say the bigger question is whether the disruption spills into the back half of the year, even as some see a shorter-lived pattern more akin to McDonald's recent food-safety setback than Chipotle's prolonged slump after multiple outbreaks.