Feb 5 - Fitch Ratings will not take any immediate rating actions following YUM! Brands, Inc.'s (NYSE: YUM) announcement that negative same-store sales (SSS) trends at China KFC will cause a mid-single digit decline in consolidated earnings during 2013. YUM expects SSS in China to decline approximately 25% for January and February combined, after declining 6% in the fourth quarter of 2012. The firm assumes SSS trends to improve as the year progresses and turn positive in the fourth quarter but has some uncertainty as to the time it will take to restore SSS growth. The sharply negative SSS trends resulted from adverse publicity related to the use of excessive levels of antibiotics by two chicken suppliers of KFC China. YUM is taking aggressive action to strengthen its supply chain and reassure customers about its food quality. The firm plans to launch a comprehensive quality assurance program with suppliers along with a targeted marketing program to support these efforts in March, following the end of Chinese New Year. Fitch is concerned about the recent declines, will review YUM's policies regarding protein procurement in China, and will watch for any potential lasting effect this negative media attention could have on KFC China's brand equity. An acceleration of monthly SSS declines would be viewed negatively, especially if sales in the U.S. and YUM Restaurants International (YRI) also exhibit weakness though not anticipated. During 2012, China represented 42% of YUM's $2.4 billion of segment operating profit while YRI and the U.S. represented 30% and 28%, respectively. YUM's cash flow continues to support the firm's plan to open at least 700 new units in China during 2013, increasing its total presence by about 10% or to nearly 6,300 units. During 2012, YUM generated $2.3 billion of operating cash flow and $651 million of free cash flow (FCF) after spending $1.1 billion on capital expenditures and $544 million on dividends. However, given the company's commitment to its investment grade rating, Fitch would expect YUM to take a more conservative stance regarding share repurchases and dividend increases should China SSS trends worsen through the course of 2013. Fitch currently rates YUM as follows: --Long-term IDR 'BBB'; --Senior unsecured notes 'BBB'; --Bank credit facility 'BBB'; --Short-term IDR 'F2'. The Rating Outlook is Stable.