UPDATE 3-KFC parent Yum lowers sales view, shares fall

* Yum Q2 EPS excluding items 50 cts vs Wall St view 43 cts

* China same-restaurant sales fall 4 pct

* Lowers 2009 same-restaurant sales outlook

* Shares fall 3.9 percent after hours
(Adds analyst comment, details on grilled chicken)

By Lisa Baertlein

LOS ANGELES, July 14 (Reuters) - Yum Brands Inc (YUM.N),
parent of the Taco Bell, Pizza Hut and KFC chains, cut its
full-year forecast for sales on weakness in its two biggest
markets, the United States and China, and its shares fell 3.9
percent.

The company, which also posted a profit that topped Wall
Street's view but did not raise its full-year earnings outlook
to reflect the beat, said it now expects 2009 same-stores sales
in mainland China to be "about flat" versus up 5 percent.

It sees U.S. same-store sales "down slightly" versus its
prior call for a gain of 3 percent. And, it trimmed its
forecast for same-restaurant sales in other international
markets, pegging growth at 3 percent versus growth of 3 to 5
percent.

Louisville, Kentucky-based Yum gets more than half of its
operating profit from China and other overseas businesses and
investors expect most of Yum's future growth to come from those
markets.

Second-quarter net income rose to $303 million, or 63 cents
per share, for the quarter ended June 13, compared with net
income of $224 million, or 45 cents per share, a year earlier.
The company previously had said that the second quarter would
likely be its most challenging and a low point for the year.

Profit excluding special items was 50 cents per share,
handily topping analysts call for earnings of 43 cents per
share, according to Reuters Estimates.

The company's effective tax rate fell to 12.8 percent from
14.9 percent in the year ago quarter.

Total revenue fell to $2.48 billion from $2.66 billion.

Yum maintained its forecast calling for per-share earnings
growth of at least 10 percent in 2009 and said it continues to
see full-year earnings of $2.10 per share, excluding items.
Analysts were expecting $2.12 per share for the year.

"The biggest surprise is that they didn't raise guidance on
this beat," said Stifel Nicolaus analyst Steve West.

During the second quarter, same-store sales in mainland
China fell 4 percent, but other international markets gained 1
percent. U.S. same-store sales fell 1 percent after Pizza Hut
posted an 8 percent decline in sales at established
restaurants.

Yum, the world's second-largest fast-food chain after
McDonald's Corp (MCD.N), has been working to turnaround its
U.S. KFC business and appears to be having some success with
its newly introduced grilled chicken.

A compilation of "brand health barometers" showed that
KFC's marketing and products like grilled chicken are catching
on with 18- to 34-year-olds, according to research from YouGov
Plc's (YOU.L) BrandIndex.

KFC is promoting a "$5 complete meal" with grilled chicken,
sides and a drink. The ads urge diners to "taste the unsub side
of KFC," a reference to a very popular $5 foot-long sub
sandwich offer from Subway that has proven popular in a weak
economy that has sent U.S. unemployment to a 26-year high.

At the end of 2008, Yum had more than 36,000 restaurants in
China, nearly 20,000 outlets in the United States and almost
13,000 restaurants in its other international markets.

Shares in Yum closed up 1.6 percent, or 56 cents, to $36.23
on the New York Stock Exchange, but fell to $34.81 in extended
trade.
(Reporting by Lisa Baertlein; Editing Bernard Orr)