Bloomberg News

Yum’s China Sales Fall Less Than Estimated as KFC Drops Slow (2)

November 13, 2013

Yum! Brands Inc. (YUM:US), which gets about half of its revenue from China, posted same-store sales in the nation that fell less than analysts estimated last month as declines at its KFC chain slowed.

Sales at stores open at least 12 months in China slid 5 percent, the Louisville, Kentucky-based company said yesterday in a filing with the U.S. Securities and Exchange Commission. Analysts estimated a 5.8 percent drop, the average of five projections gathered by Consensus Metrix.

KFC is seeing more competition (YUM:US) from local restaurant chains, such as Dicos and Hua Lai Shi. The American fried-chicken company also still is facing consumer backlash there after an outbreak of avian flu and the investigation of a former supplier for selling food with too much antibiotics. KFC’s same-store sales dropped 7 percent last month in China, compared with a 13 percent decline in September.

Yum rose 2.4 percent to $73.19 at the close in New York. The shares (YUM:US) have gained 10 percent this year, compared with a 25 percent increase for the Standard & Poor’s 500 Index.

The company has been advertising new items, such as a beef burger, and touting the quality of its food to attract Chinese consumers. Yum this month is introducing a KFC advertising campaign in China about quality assurance, Chief Executive Officer David Novak said during a conference call last month. The ads will feature store employees and suppliers such as poultry farmers, he said.

The fast-food company, which also owns Taco Bell, last month lowered its 2013 profit forecast as third-quarter revenue decreased.

China Struggles

Other American companies have been struggling in China as domestic competition grows and shoppers become more discerning. Earlier this month, McDonald’s Corp., the world’s largest restaurant chain, said same-store sales in its Asia Pacific, Middle East and Africa region fell 2.8 percent last month. Nike Inc. (NKE:US)’s sales excluding currency fluctuations dropped 3 percent in China in its fiscal first quarter.

Comparable-store sales are considered an indicator of growth because they include only older, established locations.

Yum has more than 6,000 restaurants in China, including some under the East Dawning and Little Sheep names.

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net


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Companies Mentioned

  • YUM
    (Yum! Brands Inc)
    • $73.18 USD
    • 0.54
    • 0.74%
  • NKE
    (NIKE Inc)
    • $81.8 USD
    • -0.17
    • -0.21%
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