CORRECTED-UPDATE 1-Yum China sales declines moderate, rebounding from bird flu scare

Wed Jul 10, 2013 5:27pm EDT

(Corrects number of China restaurants to 6,000 from 5,300 in paragraph 3)

By Lisa Baertlein

July 10 (Reuters) - KFC parent Yum Brands Inc on Wednesday reported a smaller than expected decline in June sales at established restaurants in China, showing signs of recovery after sales were drastically hit by the country's bird flu outbreak.

The company posted an estimated 10 percent drop in June sales - a smaller decline than in May when sales began to moderate. June results from China, the company's most important business unit, will be recorded in the current third quarter.

The sales decline in June was less than the 12.2 percent fall expected on average of 20 analyst estimates compiled by Consensus Metrix. The fast-food operator gets more than half of its overall sales in China, where most of its nearly 6,000 restaurants are KFCs.

In May, Yum's China sales fell an estimated 19 percent.

"China sales are recovering as expected. The extensive media surrounding Avian flu in China has subsided and same-store sales at KFC are clearly improving," Chief Executive David Novak said in a statement.

"As KFC sales continue to recover, we expect to have solid momentum in China heading into 2014," Novak said.

Shares of Yum were up 0.5 percent in extended trade at $72.75 after closing at $72.36 on the New York Stock Exchange.

Yum earned $281 million, or 61 cents per share, for the second quarter - down from $331 million, or 69 cents per share, a year earlier.

Excluding items, second-quarter earnings were 56 cents per share, 2 cents better than the average analyst estimate compiled by Thomson Reuters I/B/E/S.

While the official end to the fast-food chain's overall quarter was June 15, Yum's China quarter ended on May 31.

Yum reiterated its prior forecast for a mid-single-digit, full-year decline in earnings per share. The company, whose other fast-food chains include Taco Bell and Pizza Hut, expects China restaurant sales to be positive in the fourth quarter.

(Reporting by Lisa Baertlein in Los Angeles; Editing by Bernard Orr)

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