Taco Bell Cites New Menu in Profit Drop

Taco Bell Corp. on Tuesday linked a second-quarter drop in operating profits to the recent introduction of its new, low-fat Border Lights menu items.

The Irvine-based Pepsico Inc. subsidiary reported that operating profits for the quarter ended June 17 fell by 21% to $43 million.

“Our second-quarter results weren’t what we had hoped,” said Taco Bell Chairman and Chief Executive John E. Martin. “We’ve made tremendous progress with the introduction of Border Lights . . . [but] we incurred extraordinary advertising, promotion, training and other costs.”

The Border Lights line introduced in February already accounts for about 20% of Taco Bell’s total sales, Martin said. Company officials believe that, long term, the new line will have a “net positive impact” on revenue.

Following the ongoing introduction of the low-fat line, Martin said, Taco Bell will refocus its marketing on its “core” customers in a bid to bolster revenue and profitability.

Taco Bell has “already begun to introduce new products and promotions, such as our Double Decker Taco, which will get our base business back on a profitable growth track,” Martin said.

Taco Bell’s worldwide second-quarter sales rose 8% to $827 million, largely on the strength of business at new restaurants opened during the past year. Sales at stores open for more than a year, a key measure of success in the restaurant industry, fell by 4% during the quarter.