Yum Brands Sales Fall for Fourth Straight Quarter as China Woes Continue

Yum Brands Inc (NYSE:YUM), the owner of Pizza Hut and KFC, reported its fourth straight quarter of falling sales as it struggles to recover from a food scandal in China, a market where the company makes most of its profit.

Yum's shares fell about 1 percent to $91 in extended trading on Tuesday.

The company's sales at established KFC and Pizza Hut restaurants in China plunged after a television news story in July last year alleged that one of its suppliers was using meat that was past its expiration date.

Food safety is a highly emotive subject in the country, where scandals ranging from toxic baby milk formula to dirty food oil are common. That makes convincing Chinese customers to come back to a tainted brand tough, marketing experts say.

Same-store sales in China plunged 10 percent in the second quarter, much steeper than the 8.40 percent fall that analysts had expected, according to research firm Consensus Metrix.

Adding to the company's woes in China, calorie-conscious Americans back home are turning to food perceived to be healthier, meaning that Yum has been losing out to newer competitors in the shape of Shake Shack Inc (NYSE:SHAK) and Chipotle Mexican Grill Inc (NYSE:CMG) in the United States.

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Yum said in May that it would remove artificial colors and flavors from food served in Pizza Hut and Taco Bell in an attempt to woo back diners.

However, revenue fell 3 percent to $3.11 billion in the second quarter ended July 14 from a year earlier, missing the average analyst estimate of $3.19 billion, according to Thomson Reuters I/B/E/S.

Net income fell 30 percent to $235 million, or 53 cents per share, in the second quarter, from $334 million, or 73 cents per share.

Yum also took a $68 million non-cash charge related to carrying down the value of real estate assets in Mexico.

Excluding items, the company earned 69 cents per share, beating the average estimate of a profit of 62 cents.

Yum's shares closed at $91.99 on the New York Stock Exchange on Tuesday.

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Maju Samuel and Simon Jennings)