Yum says China food safety scare hurting KFC, Pizza Hut sales


Yum Brands Inc (NYSE:YUM) on Wednesday said a television expose showing improper meat handling by one of its Chinese suppliers caused "significant, negative" damage to sales at its KFC and Pizza Hut restaurants over the past 10 days.

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"If the significant sales impact is sustained, it will have a material effect on full-year earnings per share," Yum said in a regulatory filing.

Shares in Yum, which counts China as its No. 1 market, tumbled 6.1 percent in extended trading, down $4.45 to $68.55.

The latest food safety scandal to rock China came as Yum's restaurant sales there had just begun recovering from a slide last year due to an avian food outbreak and a food safety scare.

After an undercover local TV report that alleged workers at Shanghai Husi Food Co Ltd used expired meat and doctored food production dates, regulators closed the factory on July 20. The plant is part of OSI Group LLC [OSIGP.UL], a U.S. food supplier. Police have detained five people including Shanghai Husi's head and quality manager.

Yum immediately terminated its global relationship with OSI, which was not a major supplier to the company.