Yum! Brands (NYSE:YUM) reported after hours yesterday that same-store sales were down in China by 13%. In today's Stock of the Day, Motley Fool analyst Charly Travers tells investors just how surprised he is by the news, considering that when the company reported Q2 earnings only a month ago, it announced that its same-store sales for June were better than those for May, which were better than those for April.
Yum! has been plagued by difficulties on the Chinese market recently, both with an avian flu scare and poultry supply chain issues, and as the company's operations in China are vital to the company's core business, investors had been hoping that the good news in Yum!'s earnings meant its troubles in China were behind it. This news comes as an unpleasant surprise, and a step in the wrong direction.
Charly also takes a look at the stock price, and says that despite Yum!'s 8% run-up this year, he doesn't see it as an attractive buy today. At 24 times earnings, he sees it as a bit too pricey and would like to see the company resolve its difficulties in China before he gets interested.