Taco Bell plans more fried chicken ‘innovation’

LOUISVILLE, Ky. — Taco Bell says a concoction made with a deep-fried chicken “taco shell” helped lure customers into its stores, and noted that it’s planning more “Naked” chicken menu items.

The chain’s sales jumped 8 percent at established locations in the first three months of the year, which it credited in part to $1 menu items and its limited-time Naked Chicken Chalupa. The results come as other restaurant chains have struggled to increase customer traffic in stores. McDonald’s and Starbucks earlier reported sales increases in the U.S., for instance, but said they were the result of higher pricing.

Already, Taco Bell is looking to build on the Naked Chicken Chalupa’s success, and this week rolled out fried chicken pieces shaped like tortilla chips served with a nacho cheese dipping sauce.

“Let’s not kid ourselves, you’ll see more Naked products — we’d be crazy not to,” said Greg Creed, CEO of Taco Bell parent company Yum Brands.

Taco Bell’s sales performance helped Yum report a profit for the first quarter that beat Wall Street expectations. But results were disappointing at the company’s struggling domestic Pizza Hut business, which saw sales decline 7 percent at established locations.

The pizza chain has suffered in part because of its history as a chain of sit-down restaurants, at a time when people increasingly look for speed and convenience. Domino’s, by contrast, has enjoyed six years of quarterly sales growth in the U.S., including a 10 percent jump in the latest quarter.

To spark a turnaround, Yum said it recently struck an agreement with Pizza Hut franchisees in the U.S. intended to better align the business on marketing efforts and give the chain a “digital, delivery-centric focus.”

Still, Creed noted the company has a “way to go” in turning around the domestic Pizza Hut business.

Meanwhile, KFC’s U.S. sales rose 2 percent at established locations, boosted by growth in transactions. Yum pointed to the chain’s improving results over the past couple years as an example of how it might be able to turn around Pizza Hut’s results.

Factoring in overseas results, Yum’s overall sales rose 2 percent at established locations in the quarter. The company split from its China business last year.

For the quarter, Yum Brands Inc. earned $280 million, or 77 cents per share. Excluding non-recurring gains, it earned 65 cents per share. That was better than the 60 cents per share analysts expected, according to Zacks Investment Research.

Total revenue for the quarter was $1.42 billion, also exceeding forecasts for $1.35 billion.