Taco Bell Sales Rise a Little but Profit Falls a Lot

Taco Bell Corp. on Tuesday reported that sales grew by 5% for the fiscal year ended Dec. 30, but posted declines in operating profit and another important measure.

The Pepsico Inc. subsidiary reported that annual sales rose to $3.5 billion from $3.3 billion, but that operating profit fell by 62% to $274 million.

A Pepsico press release linked the yearly operating profit drop to a $169-million charge. Pepsico said that “more than half of the Taco Bell charge is attributable to Hot ‘n Now and Chevys,” two small chains that Taco Bell owns. Taco Bell did not elaborate on the charge.

The Mexican-style fast-food company also reported that sales at locations open for more than a year--an important measure in the restaurant industry--slid by 4% for the year.

During the fourth quarter, sales at existing stores fell by 5%. In contrast, same-store sales at Pepsico’s other restaurant chains rose. Pizza Hut reported a 3% increase while KFC’s same-store sales rose by 14%.

Taco Bell’s fourth-quarter operating profit rose by 20% to $116 million, according to Pepsico, but quarterly sales slid by 2% to $1.09 billion.

Taco Bell Chairman John Martin in October said that Taco Bell hoped to use a string of new products to rev up same-store sales. Martin’s pledge came after same-store sales fell by 4% during the third quarter and 4% during the second quarter.

Douglas Christopher, a restaurant industry analyst with Crowell Weedon & Co. in Los Angeles, said that Taco Bell has been taking steps to revitalize sales. “I really thought that the low-fat menu would take off . . . but they’re still working to solve their problems,” he said.

Pepsico continued its previously reported move to close under-performing stores and to sell some of its stores to franchisees. The company closed about 300 of its restaurants during 1995 and set in motion plans to close another 200 during 1996. Pepsico did not say how many Taco Bell, Hot ‘n Now and Chevys locations were involved, or how many properties were sold to franchisees.

In a related development, Nation’s Restaurant News on Monday reported that a Raleigh, N.C.-based company had closed most of 49 Hot ‘n Now restaurants that it operates in Virginia and the Carolinas. Restaurant Ventures International Inc. took over operations at the restaurants in 1995.

The industry trade publication quoted Taco Bell as saying that Hot ‘n Now, “while popular in other parts of the country, has not been successful in the Carolinas.” Taco Bell would not say how many of the drive-through hamburger restaurants are still in operation elsewhere in the country.