By Lisa Baertlein
Nov 29 Yum Brands Inc said on Thursday
that it expects a decline in fourth-quarter sales at established
restaurants in China, where a cooling economy is making it
difficult to exceed the 21 percent gain it had there a year
Yum, which saw more than half its total revenue and
operating profit for the third quarter of 2012 come from China,
said fourth-quarter same-restaurant sales there are expected to
fall 4 percent.
China's slowdown was also affecting Yum's rivals including
McDonald's Corp, Ajisen (China) Holdings, and
Hop Hing Group Holdings Ltd, said Phoebe Tse, a Hong
Kong-based analyst with Barclays.
Ajisen is a Japanese-style noodle chain, while Hop Hing's
fast food unit has the franchise licenses for the Yoshinoya beef
bowl and Dairy Queen icecream chains in northern China.
"Poor macro sentiment is having an impact and the base
comparison is not low, and therefore we have been seeing
slowing SSS (same-store-sales) growth trends throughout the
year," Tse said.
"The slowing growth this year has been quite apparent in
some first-tier cities," she added, referring to major cities
such as Shanghai, Beijing and Guangzhou.
Yum, the parent of the KFC, Taco Bell and Pizza Hut chains
is expecting same-restaurant sales to rise 4 percent at Yum
Restaurants International and 3 percent in the United States.
Same-restaurant sales are a main gauge of performance for
Yum shares fell 7 percent to $69.25 in extended trading.
Stock in Yum is widely viewed as a way for U.S. investors to bet
on what is still the world's fastest-growing major economy.
The last time Yum reported a decline in same-restaurant
sales for China appears to have been in the fourth quarter of
2009, when those sales fell 3 percent in mainland China,
according to Yum's financial reports.
Representatives for Yum did not immediately respond to
requests for comment.
"For the fourth quarter, stronger-than-expected operating
performance from Yum Restaurants International and our U.S.
division is offsetting softer sales in China," Yum Chairman and
Chief Executive David Novak said in a statement.
Yum, which is based in Louisville, Kentucky, is the biggest
Western restaurant operator in China, with more than 4,000 KFC
shops and almost 740 Pizza Hut restaurants.
"Next year will be another strong year for our China
division," Novak said. "We are extremely confident Yum China
remains the best growth story in the restaurant industry."
There were signs of weakening during the third quarter of
this year, when Yum's same-restaurant sales were up 6 percent in
China and a sales boost from menu price increases more than
offset the impact of a 1 percent decline in customer visits.
On Thursday, Yum forecast 2013 earnings per share growth of
at least 10 percent. It also repeated its call for 2012 earnings
per share growth of at least 13 percent, or $3.24 per share,
excluding special items.