Yum's China sales drop less than expected in 1Q

KFC parent Yum says China sales weren't as bad as expected in January and February

Associated Press

NEW YORK (AP) -- Yum Brands Inc. said Monday that its sales in China slid 20 percent in January and February following a food scare over its chicken suppliers. But the drop wasn't as bad as feared.

The owner of KFC and Taco Bell had forecast a 25-percent decline for the two months for sales at restaurants open at least a year. It also warned at the time that its overall profit for 2013 would drop as a result of the controversy, snapping an 11-year streak of double-digit profit growth.

With 5,300 restaurants in the country, Louisville, Ky.-based Yum is the biggest Western fast-food operator in China. KFC accounts for most the locations.

Yum's sales figure ticked up 2 percent in February, helped by the timing of Chinese New Year. The holiday's timing hurt January's sales, however, ultimately having a neutral impact on results for the two months.

January and February make up Yum's first quarter in China.

The company has been reeling from a December TV report in China that said its suppliers were giving chickens unapproved levels of antibiotics. But Yum has since launched a campaign to rebuild its brand, announcing that it eliminated more than 1,000 small producers from its supplier network and that it would strengthen oversight over farmers.

CEO David Novak has also noted that Yum overcame major ordeals in the past, such as an avian flu scare in 2005 that dragged down sales by as much as 40 percent. And the company has said it plans to forge ahead with its expansion plans in China, which has been a key engine of growth for the company.

To keep investors updated on its efforts, Yum is reporting monthly sales figures for China until the business recovers.

Yum shares gained $4.06, or 6 percent, to $71.90 in after-hours trading. They had closed up 12 cents to $67.84 Monday, and are nearly unchanged in the past three months.

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