Yum! Brands (YUM +0.79%) reported yesterday that its same-store sales fell by 5% in China during the month of October. The company continues to see the effects of concerns over its poultry following an avian flu outbreak in China, and an investigation into one of its former suppliers, and the supplier's supposed use of too much antibiotics, which was announced in December 2012.
Yum! did highlight that its Pizza Hut Casual Dining segment saw its same-store sales in China grow by 10%; however, its popular fried chicken KFC restaurant saw its sales fall by 7%.
China is a critical region for Yum, which is the biggest Western fast-food operator in the country. The country accounts for more than 40% of the company's operating profit but sales have been slowing at its KFC restaurants there.
In the third quarter (which includes June, July, and August), Yum! had total same-store sales decline of 11% in its China Division, with a 14% decline at KFC. Its Pizza Hut Casual Dining segment had its same-store sales grow by 4%. September same-store sales were down 11% in China, and 13% at KFC, while Pizza Hut Casual Dining was up 6%.
In its third-quarter earnings release in early October, the company announced that it would be lowering its full-year guidance as a result of the "lower-than-expected China sales and a higher-than-expected full-year tax rate."
In that release, CEO David Novak noted:
Even with our recent challenges, KFC is unquestionably the category leader in China and we remain confident sales will fully recover from the adverse publicity surrounding the December poultry supply incident. Our Pizza Hut business in China continues to deliver strong results, and the rest of Yum! is performing generally as expected for the full year.
-- Material from The Associated Press was used in this report.
