Yum's Quarter Disappoints, China Sales Tank

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REUTERS/Shannon Stapleton

Yum! Brands just announced Q3 earnings.

The company reported adjusted earnings of $0.85 per share, on revenue of $3.47 billion.

This missed expectations for adjusted earnings of $0.92 per share, on revenue of $3.52 billion.

Same-store sales in China were down 11% in Q3, slightly below expectations for a 10.5% fall.

But in September, China comp sales fell 11%, against expectations for a 5.7% fall.

Yum derives a large part of its revenue from China, so investors watch for clues on the health of the Chinese consumer.

CEO David Novak said "we remain confident sales will fully recover from the adverse publicity surrounding the December poultry supply incident." Yum was caught in a scandal, after the Shanghai Food and Drug Administration found that a chicken supplier to Yum from 2010 - 2011 had supplied chickens with high levels of antibiotics.

Here's their revised guidance:

"Based on KFC China sales for September, it is now unlikely China Division same-store sales will be positive for the fourth quarter. Given lower-than-expected China sales and a higher-than-expected full-year tax rate, the Company now estimates a high-single to low-double-digit full-year EPS decline versus prior year, excluding Special Items. This compares to our previous guidance of a mid-single-digit decline in EPS."

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