(Adds more analyst comment)
By Lisa Baertlein
March 11 KFC parent Yum Brands Inc
reported an unexpected 2 percent rise in February sales at
established restaurants in China, boosted by Chinese New Year
and easing worries about a food safety scare that drove away
Shares in Yum jumped 6.6 percent in extended trading to
$72.32, their highest level since November, after the results
were far better than the estimated 8.7 percent drop expected by
three analysts polled by Consensus Metrix.
Yum also said on Monday first-quarter same-restaurant sales
in China fell 20 percent, less than its prior forecast for a 25
The company last month warned that plunging China sales
would cause 2013 profits to shrink rather than grow. It also
said it expected KFC same-store sales in China to turn up by the
Yum China's latest results "would seem to imply that the
recovery is potentially going to be faster than what we
thought," Bernstein Research analyst Sara Senatore said.
The fast-food operator reaps more than half of its overall
sales in China, where most of its nearly 5,300 restaurants are
KFCs. It does not normally report monthly China sales results,
but is doing so while it works to turn that business around.
A new Reuters analysis of comments on Weibo - China's
version of a social media site - showed that the number of angry
posts about KFC has shrunk, suggesting that public outrage over
contaminated chicken found in some of Yum's food supply is
While trends are moving in the right direction, Yum's China
crisis is far from over, analysts said.
"You're still taking about a negative double-digit comp
right now," said Morningstar analyst R.J. Hottovy.
Yum still must rebuild consumer trust and repair its image
in China, where it has long enjoyed a reputation for serving
high-quality food, Hottovy said.
Yum China's February results included flat same-restaurant
sales at KFC and 13 percent growth at Pizza Hut Casual Dining.
Chinese New Year raised February restaurant sales in the
mid-teen percentages and offset a similar hit in January, Yum
said in a statement. As a result, the overall impact of the
holiday was neutral for the first quarter, which includes only
January and February.
The division, which is Yum's largest, posted a 37 percent
drop in same-restaurant sales for January. That included a 41
percent fall at KFC and a 15 percent decline at Pizza Hut Casual
Diners in China started cutting back on visits to Yum's
restaurants in December after news reports and government
investigations focused on chemical residue found in a small
portion of its chicken supply.
Yum was not fined by food safety authorities.
The company has apologized for the chicken incident, vowed
to end ties with smaller poultry suppliers that have not
modernized their operations and pledged to further tighten its
food safety procedures.
"I do think they've said all the right things so far. It's
just going to take some time for consumers to get over the
negative perception," Hottovy said.
(Reporting by Lisa Baertlein in Los Angeles; Editing by Phil