Bloomberg News

Yum Slumps After Expired Food Probe Hurts China Sales

July 31, 2014

Yum! Brands Inc. (YUM:US), owner of KFC and Pizza Hut, fell to its lowest in almost six months after it said sales in China have been hurt by the latest food scare there.

The shares (YUM:US) dropped 4.9 percent to $69.40 at the close in New York for the lowest price since Feb. 3. Yum has lost 8.2 percent this year.

There has been a “significant, negative impact” to same-store sales at KFC and Pizza Hut during the past 10 days in China, the Louisville, Kentucky-based company said in a filing yesterday. It’s too early to tell how quickly sales will recover, it said.

“Yum used similar language when it disclosed the impact of the negative press around its chicken supply chain in December 2012,” Sara Senatore, a New York-based analyst at Sanford C. Bernstein & Co., wrote in a note. “Comps declined 25 percent in the initial aftermath of that incident, suggesting that comps may have declined a similar magnitude in the days following the emergence of the news.”

Yum Brands, just recovering from a supply chain investigation in China that started in 2012, earlier this month was hit by another food scare in the country. Yum supplier Husi, a division of OSI Group LLC, became the subject of a government probe into the altering of expiration dates on food. Yum terminated its relationship with OSI globally after the investigation, while McDonald’s Corp. (MCD:US) said it would source items from another Husi plant in Henan.

“While OSI was not a major supplier to Yum Brands, these events triggered extensive news coverage in China that has shaken consumer confidence, impacted brand usage, and disparaged the hard work of our over 400,000 Chinese employees,” Yum said in the filing.

The company, which also owns Taco Bell, gets about half of its revenue from restaurants in China.

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

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net Cecile Daurat


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Companies Mentioned

  • YUM
    (Yum! Brands Inc)
    • $73.14 USD
    • 0.35
    • 0.48%
  • MCD
    (McDonald's Corp)
    • $94.78 USD
    • 0.95
    • 1.0%
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