0103105 Taco Bell Sales Stabilizing After Slump

New York - Taco Bell restaurant sales are stabilizing after a slump last year that caused cash-flow problems at about 1,000 units amid a scare over genetically modified corn, Tricon Global Restaurants Inc. said.

Tricon, the No. 2 U.S. restaurant company that also runs the KFC and Pizza Hut chains, expects Taco Bell same-store sales to be flat this year, Chief Financial Officer Dave Deno said in a conference call with industry analysts. Tricon expects same-store sales growth of between 1 and 2% for KFC, and around 3% for Pizza Hut.

Company officials outlined plans to generate sales growth while working with banks to restructure the debt of about 1,000 units that are still financially troubled as a result of the subsequent double-digit drop in sales.

To grow sales, the company said it will focus on higher-end menu items, expand in populous countries such as China, and open more restaurants where two or three of its brands are sold under the same roof.

“Sales increases are about 30% when we convert to multi-brands,” said Tim Jerzyk, Tricon's vice president of investor relations.

Tricon reported on Thursday that March same-store sales for all U.S. outlets were down 1%. One bright spot was sales of Taco Bell's new steak soft taco, which exceeded expectations in March, prompting a permanent price increase for the item.

“That is a sign we can move quality up in the Taco Bell brand and consumers really like it and are willing to pay for it,” Jerzyk said.

Same-store sales at U.S. Taco Bell outlets fell 5% in 2000 amid marketing problems, poor execution at some stores and confusion among consumers about a recall of Taco Bell brand taco shells containing the genetically-modified StarLink corn.

The recalled shells were sold in grocery stores, not used in restaurants, but the company said the recall still hurt restaurant sales.

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