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KFC parent Yum’s China earns less due to chicken scandal


Yum Brands KFCKFC parent Yum Brands Inc on Monday warned that it expects 2013 earnings to shrink rather than grow, as it grapples with a food safety scare in China where it makes more than half of its overall revenue.

Yum shares fell 6 percent in after-hours trading, as the news was even worse than expected by the analysts, who have largely stuck by the company in recent months.

Yum, which gets more than half of its overall sales and operating profit from China, reported a 6 percent drop in fourth-quarter sales at established restaurants in China due to “adverse publicity” regarding its poultry supply.

Its business there continued to suffer in January, when China same-store sales dropped 37 percent, including a 41 percent fall for KFC and a 15 percent decline for Pizza Hut Casual Dining.

As a result, Yum forecast a “mid-single digit” percentage decline in earnings per share for 2013. Yum previously forecast 2013 earnings per share growth of at least 10 percent, and analysts polled by Thomson Reuters I/B/E/S on average had expected the same.

Yum has nearly 5,300 restaurants in China, mostly KFC. Its strong reputation for high food quality helped it grow briskly in a country where there have been some serious food safety scandals.

But the company was shaken by revelations that two of its poultry suppliers purchased chicken from farmers who used excessive levels of antibiotics in their animals. While the company was not fined by food safety authorities, it has suffered a huge backlash on social media in the country.

“I don’t think anybody saw this coming,” said Edward Jones analyst Jack Russo, who like many others expects the company to eventually bounce back. “Investors are definitely going to need some patience.”

The company said it expected a same-store sales decline of 25 percent for January and February combined for its China business. It also said KFC same-store sales in China should turn positive by the fourth quarter.

Yum said it still planned to develop 700 new units in China this year and that it would begin an aggressive marketing campaign to restore KFC’s brand image.

Yum’s fourth-quarter net income fell to $337 million, or 72 cents per share, from $356 million, or 75 cents per share, a year earlier.

Excluding special items, Yum had a profit of 83 cents per share. That topped analysts’ average estimate by a penny, according to Thomson Reuters I/B/E/S.

Total revenue rose to $4.15 billion from $4.11 billion.

Through Monday’s close, Yum shares were down 14 percent from late November, when they hit an all-time high, but then sank on the initial China sales warning.

Source: Reuters – “Yum’s China woes slam sales and profits”
 

About chankaiyee2

Author of the book "Tiananmen's Tremendous Achievements" about how with the help of Tiananmen Protests, talented scholars with moral integrity seized power in the Party and state and brought prosperity to China. The second edition of the book will be published within a few days to mark the 25th anniversary of Tiananmen Protests All the parts in the first edition remain in the second edition with a few changes due to information available later and better understanding. There are also some changes for improvements of style. The new parts are Chapters 12-19 on events in China after the first edition was published: The fierce power struggle for succession between reformists and conservatives; Xi Jinping winning all elders’ support during his mysterious disappearance for 2 weeks in early September, 2012; and Xi Jinping Cyclone. Chan Kai Yee's new book: SPACE ERA STRATEGY: The Way China Beats The US An eye-opening book that tells the truth how the US is losing to China. The US is losing as it adopts the outdated strategy of Air-Sea Battle while China adopts the space era strategy to pursue integrated space and air capabilities: It is losing due to its diplomacy that has given rise to Russian-Chinese alliance. US outdated strategy has enabled China to catch up and surpass the US in key weapons: Hypersonic weapons (HGV) that Pentagon regards as the weapon that will dominate the world in the future. Aerospaceplane in China’s development of space-air bomber that can engage enemy anywhere in the world within an hour and destroy an entire aircraft carrier battle group within minutes. Anti-satellite (ASAT) weapons, anti-ASAT weapons, stealth aircrafts, drones, AEW&C, etc. The book gives detailed descriptions of China’s weapon development based on information mainly from Chinese sources that the author monitors closely. U.S. Must Not Be Beaten by China! China is not a democracy. Its political system cannot prevent the emergence of a despotic leader or stop such a leader when he begins to bring disasters to people. A few decades ago, Mao Zedong, the worst tyrant in world history did emerge and bring disasters to Chinese people. He wanted to fight a nuclear war to replace capitalism with communism but could not bring nuclear holocaust to world people as China was too weak and poor at that time. If a despot like Mao Zedong emerges when China has surpassed the US in military strength, world people will suffer the misery experienced by Chinese people in Mao era. China surpassing the US in GDP is not something to worry about as China has the heavy burden to satisfy its huge population, but China surpassing the US in military strength will be world people’s greatest concern if China remains an autocracy. US people are of much better quality than Chinese people. What they lack is a wise leader to adopt the correct strategy and diplomacy and the creative ways to use its resources in developing its military capabilities. I hope that with the emergence of a great leader, the US can put an end to its decline and remain number one in the world. China, US, space era strategy, air-sea battle, space-air bomber, arms race, weapon development, chan kai yee

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One thought on “KFC parent Yum’s China earns less due to chicken scandal

  1. Reblogged this on Oyia Brown.

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    Posted by OyiaBrown | February 5, 2013, 7:15 pm

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