February 4, 2014 / 4:56 PM / 4 years ago

KFC parent Yum monitoring bird flu in China

Feb 4 (Reuters) - KFC parent Yum Brands Inc said it is monitoring the return of bird flu in its top market of China, and while it has not seen a meaningful impact on national sales, hard hit areas have experienced some softening in demand.

“Same-store sales results haven’t been quite as strong in some of the areas where reported cases of flu have been more pronounced,” Yum Chief Financial Officer Patrick Grismer said on Tuesday on a conference call with analysts.

State news agency Xinhua said on Feb. 3 the country has reported more than 100 human H7N9 avian flu cases this year, including over 20 deaths, with Zhejiang and Guangdong provinces most affected.

“As you would expect, we’re monitoring the situation closely,” Grismer said.

Yum gets more than half of its overall sales in China, where most of its more than 6,200 restaurants are KFCs.

Yum on Monday reported better-than-expected fourth-quarter earnings, even as China sales at established restaurants fell 4 percent, a figure including an estimated decline of 4 percent at KFC and 5 percent growth at Pizza Hut Casual Dining.

The fast-food company has been fighting to boost consistent sales growth in China, where a food safety scare and the first wave of the H7N9 avian flu outbreak hurt sales last year.

“It’s early days and we don’t know what we don’t know,” David Novak, Yum’s chairman and chief executive, said of the resurgent avian flu in China. “Right now, we’re just not seeing much.”

Novak said 2014 would be a strong bounce-back year for Yum, and repeated the company’s forecast for earnings per share growth of at least 20 percent this year. Investors betting on Yum’s comeback sent shares up 8.3 percent to $71.66 in trading on the New York Stock Exchange.

During the company’s earnings conference call, analysts repeatedly pressed executives for more details on the potential for bird flu to again depress Yum’s China sales and to further delay its recovery there.

In particular, they noted that Yum China chicken supplier Tyson Foods Inc on Friday said concern about the return of avian flu in China threatens to further hamper demand, which is still weak due to a softening economy, food safety concerns and bird flu.

Tyson said demand for chicken is down as much as 30 percent in China, resulting in a substantial oversupply of chicken.

Yum executives said Tyson is among its roughly 30 chicken suppliers in China and declined to respond to that company’s comments.

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