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Yum: China recovery proceeding slower than expected

Yum: China recovery proceeding slower than expected

Same-store sales in the division rise 2 percent during the third quarter

Yum! Brands Inc. reported Tuesday that same-store sales turned positive in its important China market during the third quarter ended Sept. 5, but recovery is proceeding more slowly than expected.

Same-store sales for the China division rose 2 percent, the first positive reading in a year, following a food safety scare in the country that led to a steep drop in sales at the company’s brands there.

Sales were positive elsewhere in the world. Same-store sales for its three brands — KFC, Pizza Hut and Taco Bell — all rose outside of China, except for India, where same-store sales fell 18 percent.

Nevertheless, the performance of Yum’s brands in China led the company to acknowledge that it would fall short of its target to generate 10-percent earnings growth for the year.

“The pace of recovery in our China division is now below our expectations,” Yum CEO Greg Creed said in a statement. “Outside of China, our Taco Bell and KFC divisions continued to sustained their positive sales momentum, while Pizza Hut was relatively flat.”

Yum’s stock fell more than 17 percent in after-hours trading Tuesday on the news.

Same-store sales at Taco Bell increased 4 percent in the quarter. Year-to-date, the chain’s same-store sales have risen 5 percent.

Meanwhile, KFC continued its momentum. Same-store sales in the quarter rose 3 percent, including a 2-percent increase in the U.S.

At Pizza Hut, which has been struggling in the face of heavy competition in the pizza market, same-store sales rose 1 percent, including flat sales in the U.S.

Total revenue for the company rose 2 percent in the quarter, to $3.43 billion, from $3.36 billion the previous year. Net income rose 4 percent, to $421 million, or 97 cents per share, from $404 million, or 91 cents per share, in the same period a year ago.

China remains Yum’s most important market, representing more than half of the company’s total sales and operating profit. Yum has 6,867 locations in China, and nearly 42,000 locations across its brands worldwide.

Contact Jonathan Maze at [email protected].
Follow him on Twitter: @jonathanmaze

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