Taco Bell apparently didn’t get the message that customers are shying away from fast-food chains right now.
The Irvine, California-based Mexican chain’s same-store sales rose 5% in the U.S. in the second quarter, parent company Yum Brands said on Tuesday. The performance stood out in a sea of disappointing results from quick-service concepts.
What’s more, the company is doing so profitably, as restaurant-level margins are near a record high.
That includes its fellow Yum counterparts. KFC’s same-store sales declined 5% in the U.S. in the quarter, continuing a run of steeply falling sales. Internationally, the chain’s same-store sales declined 2%.
Pizza Hut’s same-store sales declined 1% in the U.S. and 4% internationally, while the fast-casual brand Habit’s same-store sales fell 6%.
Taco Bell generated its same-store sales by focusing on innovation. Notably, the company’s Cantina Chicken menu, a platform with upgraded chicken items, performed “above expectations” in the quarter, executives said.
“One in four items included a Cantina Chicken item,” Yum Brands CEO David Gibbs told analysts on Tuesday. He noted that Taco Bell is outperforming the market by a “wide margin.”
“It’s a clear standout in today’s environment,” he said.
Taco Bell has unleashed a steady rate of innovative products this year, including the Cheez-It Crunchwrap and Secret Aardvark Hot Sauce.
Taco Bell could also be benefiting from a more value-conscious consumer. While Yum Brands cited the chain’s innovation, it has long had a strong value reputation and has plenty of that on its menu, including a Cravings Value Menu featuring items at $3 or less and, more recently, the addition of a $7 Luxe Cravings Box.
Revenues at Yum Brands increased 4% to $1.8 billion. Net income declined 12% to $367 million, or $1.28 per share. The earnings-per-share number did not meet Wall Street expectations, based on data from the website Earnings Whispers.
KFC had mixed results internationally. It grew units by 9% in the quarter. KFC is “not constrained by expansion opportunities,” Gibbs said. But the brand has been constrained by consumer rejection of U.S. brands in certain Muslim countries amid protests over U.S. policies in the Middle East.
The company said that weakness has been countries like Malaysia, Indonesia and the Middle East along with certain neighborhoods in markets around the world.
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