E. coli incident takes a bite out of Taco Bell

Taco Bell sales fell 5% in the fourth quarter of 2006, its parent company said Monday. During that period, tainted lettuce served by the chain caused an E. coli outbreak that sickened more than 70 East Coast customers.

Without loyal customers such as Myles, the company's sales would have taken an even worse hit.

During the peak of the outbreak, sales for the Irvine-based chain plummeted 20% nationally and 35% to 50% in the Northeast, said David S. Palmer, a UBS Equity Research analyst.

"Consumers have short memories and are pretty forgiving," said Bob Sandelman, a San Clemente-based restaurant industry consultant.

Taco Bell became the butt of late-night comics. Jay Leno talked about how Taco Bell should change its slogan from "Think Outside the Bun" to "Puke Outside the Store." David Letterman suggested that the chain add "Taco Apocalypto" to its menu.

Taco Bell corporate parent Yum Brands Inc. of Lexington, Ky., barely mentioned the outbreak in its fourth-quarter earnings report released Monday.

Yum obliquely blamed the 5% drop in sales at Taco Bell restaurants open a year or more on "adverse publicity related to a produce-sourcing issue." E. coli was conspicuously absent -- even though it contributed to calls for more stringent farm practices in California and greater federal oversight.

Myles, a senior at Los Alamitos High School, doesn't spend much time thinking about the "produce-sourcing" issues when eating his fill of wraps, gorditas and tacos at least twice a month.

"I eat there because it is cheap for how much food you get," said Myles, who played the voice of Steve in the 2006 animated film "The Ant Bully." He figured the odds of getting sick were on his side. "Statistically, I thought I would be fine."

Yum provided almost no financial details about the effect on Taco Bell except to say that sales were recovering from their December low.

Overall, Yum reported a profit of $232 million, or 83 cents a share, a 3% gain from $226 million, or 77 cents, a year earlier. Sales rose 4% to $3 billion. Yum also owns the fast food chains Pizza Hut and KFC.

Before the earnings release, Yum shares rose 29 cents to $60.78. The price, near its 52-week high, was little changed in after-hours trading.