Taco Bell Sales Up for 3rd Quarter, but Profits Decrease Again

IRVINE — Taco Bell Corp.’s chain-wide sales rose by 7% during the third quarter ended Sept. 9, but the Irvine-based restaurant company also reported Tuesday that operating profit and one other important measure fell for the second consecutive quarter.

Taco Bell’s quarterly sales rose to $893.2 million from $929.8 million, but its operating profit slipped by 6% to $81.2 million from $86.8 million. Sales at restaurants open for a least a year fell by 4%. Taco Bell linked the 7% overall sales increase to sales at restaurants that opened during the past year.

Taco Bell Chairman John Martin said he was “disappointed” by the same-store sales results, but he expressed optimism that new products in the pipeline would “energize” the company’s business during upcoming quarters.

“We’re aware the entire [restaurant] industry has softened in a highly competitive environment,” said Martin, who expects “aggressive new product marketing” to rev up the company’s stalled same-store sales.

In the second quarter, operating profit fell by 21%, while same-store sales dropped by 4%.

In July, Martin acknowledged that second-quarter results “weren’t what we had hoped.” Martin blamed the 21% drop in operating profit on heavy marketing and advertising expenses associated with the chain’s new, low-fat Border Lights menu. Taco Bell said Tuesday that the low-fat menu already accounts for about 15% of its total sales.

Taco Bell “continues to aggressively bring new products to market to improve these results,” said the company, which is owned by Purchase, N.Y.-based Pepsico Inc. The drop in same-store sales came “despite the introduction of the Double Decker Taco, Volcano Burrito and Texas Taco,” three products that are geared toward Taco Bell’s younger customers.

Taco Bell’s sales for the 36-week period ended Sept. 9 rose by 8% to $2.5 billion from $2.3 billion while its operating profit fell by 11% to $156.3 million from $175.1 million.