By Lisa Baertlein
Dec 2 Yum Brands Inc said November sales
at established KFC restaurants in China, its top market, failed
to grow despite a successful half-priced chicken promotion, and
it forecast a return to earnings per share growth in 2014.
China accounts for more than half of Yum's operating profit.
Its shares have risen 14 percent since the start of November on
expectations that China's KFC restaurant sales are poised for a
The results released Monday put a chill on such hopes,
sending shares in the fast-food chain operator down 2.8 percent
to $75.52 in extended trading.
Yum's overall China same-restaurant sales rose 1 percent in
November, including flat sales at KFC and a gain of 7 percent
at Pizza Hut Casual Dining. Yum is the biggest Western
restaurant operator in China and had almost 4,500 KFC outlets
there at the end of its third quarter.
Nine analysts, on average, had expected a 3.1 percent sales
decline at KFC and an 8.8 percent rise at Pizza Hut, according
to Consensus Metrix.
The limited-time half-priced bucket promotion yielded a
roughly 16 percent increase in KFC China same-restaurant sales
for the first 10 days of November. KFC same-restaurant sales
fell about 8 percent for the rest of the month, Yum said in a
Yum forecast at least 20 percent growth in 2014 earnings per
share, excluding special items.
Bernstein Research analyst Sara Senatore estimated 2014
earnings of $3.48 per share, which implies 21 percent growth
over this year.
"We expect to have a strong bounceback in 2014 following a
year that is clearly below our high expectations," Chief
Executive David Novak said in a statement.
"In China, we have an aggressive plan to reignite sales at
KFC," Novak said.
Louisville, Kentucky-based Yum also repeated its forecast
for a high-single to low double-digit percentage decline in 2013
earnings per share, excluding items.
Yum's China business took a dive after China Central
Television on Dec. 18 reported that a few poultry farmers doing
business with Yum suppliers fed their chickens excessive levels
of antibiotics. That was followed by a bird flu outbreak in the
The Shanghai Food and Drug Administration investigated the
chicken contamination incident. The agency did not bring a case
against Yum China and did not assess a fine.
The China chicken supplier scandal has hurt Yum's reputation
for serving safe, high-quality meals in China. Hamburger giant
McDonald's Corp was also swept up in the controversy,
though to a lesser extent.
Restoring diners' trust has proven difficult in the country
where food contamination, with sometimes deadly outcomes, is a
Yum has tightened its poultry supplier network and launched
an "I Commit" (to serving safe food) campaign to reassure
Chinese consumers, but recently said it expects the process to
take more time.