Yum Brands Cuts Outlook Citing Chicken Probe Backlash

Yum Brands (NYSE:YUM), the parent of KFC, Taco Bell and Pizza Hut, lowered its fourth-quarter sales and fiscal-year 2012 earnings outlook late Monday citing an ongoing probe regarding the quality of its chicken in China.

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The Louisville, Ky.-based company blamed the bleak view on “adverse publicity associated with a government review of China poultry supply - and the corresponding significant impact on KFC China sales during the last two weeks of December.”

Yum now sees same-store sales, a key growth metric measuring sales at stores open longer than a year, falling 6% in its China division, below its earlier outlook of a decline of 4%.

For the full-year 2012, it now sees earnings excluding special items of $3.24, edging two cents below average analyst estimates in a Thomson Reuters poll.

Yum, which is scheduled to report earnings on Feb. 4, defended the quality of its food in December following customer backlash when food regulators in China said certain samples of its chicken contained unusually high levels of antibiotics.

According to the SFDA report, eight of the 19 batches of chicken samples Yum Brands sent to a testing laboratory in 2010 and 2011 were affected. 

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The public relations blow to the company's image comes in the highly competitive, fast-growing Chinese market where KFC faces intense rivalry with Taiwanese-owned fried chicken chain Dico.

Shares of Yum slid more than 3% to $65.80 after hours.