Tags: Yum | Profit | Sales | China

Yum Profit Tumbles as Sales Weaken in China

Tuesday, 08 Oct 2013 05:58 PM

Yum! Brands Inc., whose KFC fast-food chain is facing more competition in China, said third-quarter profit fell 68 percent and cut its earnings forecast as same-store sales dropped in the Asian nation.

Net income decreased to $152 million, or 33 cents a share, from $471 million, or $1, a year earlier, the Louisville, Kentucky-based company said Tuesday in a statement. Excluding certain items, profit was 85 cents a share. Analysts projected 92 cents, the average of 23 estimates compiled by Bloomberg.

Yum, which gets about three-quarters of its revenue from outside the U.S., is facing more competition from expanding restaurant chains, such as Dicos and Hua Lai Shi in China. It’s also facing a backlash from consumers there after an outbreak of avian flu scared diners away from poultry and a former chicken supplier was investigated for selling food with too much antibiotics. Sales at Chinese stores open at least 12 months fell 11 percent at Yum eateries.

The company lowered its forecast for 2013 earnings, citing “lower-than-expected China sales and a higher-than-expected full-year tax rate.” Full-year earnings excluding certain items will decline at a “high-single to low-double-digit” percentage rate from the prior year, the company said. Yum previously said earnings would decline at a “mid-single-digit” rate.

Yum shares fell 7.2 percent to $66.50 at 6 p.m. in New York, after closing at $71.67. The shares gained 7.9 percent this year through the close of regular trading Tuesday, compared with a 16 percent gain for the Standard & Poor’s 500 Index.

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