Yum Brands Shares Sink on 3Q Results

RetailReuters

Yum Brands Inc said on Tuesday sales at established restaurants in its top market of China rose far less than expected for the third quarter, sending its shares down more than 17 percent in extended trading.

Continue Reading Below

China is Yum's biggest market for profit and sales, and its challenges there appear to be changing from reputational to economic.

Sales at China KFC and Pizza Hut restaurants open at least one year rose 2 percent in the latest quarter, less than the 9.6 percent jump analysts had expected, according to research firm Consensus Metrix.

The increase in same-restaurant sales ended four straight quarters of declines following a meat scandal in July 2014.

Now Yum faces a slowing economy in China, where this year's growth is expected to cool to its lowest annual rate in six years.

Given a slower-than-expected recovery in China sales, particularly at Pizza Hut Casual Dining, as well as stronger foreign exchange headwinds, Yum said it now expects full-year earnings per share growth in the low-single-digit percentages.

It previously forecast earnings per share growth of at least 10 percent, in part due to an expected recovery in China.

Yum's same-store sales in China took a dive after a television news story in July 2014 alleged that one of its suppliers was using meat that was past its expiration date.

Yum shares tumbled to $69.10 in extended trading, after closing at $83.42.

(Reporting by Lisa Baertlein in Los Angeles; Editing by Meredith Mazzilli and Richard Chang)

What do you think?

Click the button below to comment on this article.