Taco Bell is apparently unstoppable right now
Taco Bell highlighted its upcoming sales efforts at its Consumer Day earlier this year. | Photo by Jonathan Maze.
Fast-food restaurant chains have been releasing a series of quarterly results in recent days that have reflected a brutal consumer environment. Domino’s, Starbucks and even Chipotle Mexican Grill reported negative same-store sales results, in every case underperforming expectations. And on Wednesday morning KFC, Pizza Hut and Habit Burger & Grill joined the parade of negativity.
And then there was Taco Bell.
The Mexican fast-food chain reported 9% same-store sales growth in the first quarter, its best performance in two years. At a time when other chains disappointed, Taco Bell’s sales results accelerated.
“That was an impressive achievement in the backdrop of soft industry trends,” David Gibbs, CEO of Taco Bell parent Yum Brands, told investors on Wednesday.
The company has quick plans to improve sales even further, through beverages.
Taco Bell in December opened its in-store beverage concept, Live Mas Café. The café has quickly driven 40% sales growth in that restaurant, which is now selling an average of 300 specialty beverages per day. Gibbs told analysts the company plans a “rapid expansion this year” of the concept into more stores.
The company also recently reintroduced its Crispy Chicken Nuggets, which are expected to further drive sales this quarter.
(Check out our story on Taco Bell’s fast-food Mexican dominance.)
Taco Bell generated strong sales last quarter with a combination of new menu items and its budget-friendly Luxe Cravings Boxes priced at $5, $7 and $9.
Digital sales also took off, increasing 37% year over year. Taco Bell now gets 42% of its sales through digital channels.
Taco Bell’s performance comes amid what executives called a “complex year to navigate” given the challenging consumer environment. But CFO Chris Turner said that Taco Bell in particular is poised to take share in a market like this from “higher-priced competitors.”
That could mean Chipotle, which is likely Taco Bell’s only real competitor right now and which is suddenly facing value questions following a surprisingly difficult quarter.
Yet Taco Bell is outperforming just about every other fast-food chain, too. That includes sister chains KFC (down 1% in the first quarter) and Pizza Hut (down 5%). Taco Bell represents 80% of Yum’s U.S. profit. And the brand’s ability to offer value and generate higher profits at the same time work to its distinct advantage.
“We just think it works well in an environment like this,” Gibbs said of Taco Bell.
What’s more, the company’s lack of any real competition only helps the brand. After all, McDonald’s could offer, say, a new chicken sandwich and if it does well then Wendy’s and Burger King might do the same. For Taco Bell, that’s not a problem.
After all, nobody else sells a Crunchwrap.
“We don’t have to worry about anybody else copying our menu,” Gibbs said. “Nobody sells anything close to what we sell.”
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