Is Taco Bell's Breakfast Already a Dud?

McDonald's has no reason to fear the waffle taco. Sure, Yum! Brands' (NYSE: YUM  ) Taco Bell made an aggressive push into the fast-food breakfast market recently, and it singled out Mickey D's as the main competitive target.

But investors will have to squint hard to see the lift that the expansion had on Taco Bell's business: Same-store sales improved just 2% in the second quarter. By comparison, the chain managed that exact result in three of the last five quarters -- without the help of breakfast burritos.

Source: Taco Bell.

That sluggish start probably doesn't spell doom for the breakfast push, but it does show how hard it will be for Yum! to steal major sales gains in the morning hours.

Blame it on Doritos
Much of Taco Bell's disappointing second-quarter growth can be tied to factors other than the new breakfast offering, anyway. The Doritos Locos Taco line, which has cranked out a string of massively popular hits, stumbled this summer. Management told investors that the latest chip-inspired twist, Spicy Chicken Cool Ranch, performed worse than expected after launching in May. 

Plus, the company temporarily directed most of its marketing dollars to supporting the breakfast launch, which likely hurt sales through the rest of the day. With breakfast at least up and running now, Taco Bell can turn back to promoting new core menu innovations like the Quesaritio. Same-store sales growth, as a result, should march higher in the second half of the year.

No game changer
The best news for Yum! investors is that Taco Bell is already making a profit during the breakfast hours despite the added food and labor costs. That's no small achievement given how competitive the category is and the difficulty in getting customers to change their morning routines. 

There's also no denying that the opportunity ahead is huge. Yum! executives like to point out that McDonald's books roughly $1 million in sales each day before 11 a.m., when Taco Bell restaurants used to open their doors for business. 

Still, the early results point to much more modest sales gains ahead from the new breakfast hours, enough to make it worthwhile to Taco Bell, but far from a game changer.

Will Apple's next smart device lead to tasty returns for investors like you?
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3034635, ~/Articles/ArticleHandler.aspx, 10/22/2014 1:08:56 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement