Yum sees China KFC sales recovering by fourth quarter

KFC parent Yum Brands Inc expects sales at its KFC restaurants in China to recover by the end of the year and fears surrounding a bird flu outbreak to be short-lived, company executives told analysts during a conference call.

Based on prior health crises, including a bird flu outbreak in 2005, the company expects sales to improve over six to nine months, and has instituted "Operation Thunder" to restore buyer confidence in its KFC brand, said Chief Executive David Novak.

"Operation Thunder to the Chinese people means strong decisive action," said Novak, who said the company has eliminated 1,000 smaller, less sophisticated chicken suppliers and started 30-second TV commercials to promote quality assurance.

"Cooked chicken in perfectly safe," Novak stressed.

Sales at established restaurants in China fell an expected 20 percent in the first quarter, and Yum warned that fears surrounding the bird flu outbreak there were continuing to hurt sales already struggling to recover from a previous food safety scare.

Yum on Tuesday reported quarterly profit fell less than Wall Street expected, despite the results from China.

The fast-food operator reaps more than one-half of overall sales from China, where most of its nearly 5,300 restaurants are KFCs.

Yum intends to continue expanding in China, and is on track to add 700 new restaurants this year, company executives said.

"We know we're doing the right things," said Novak. "We have a great brand and we intend to stay the course. We have growth staring us in the face."

Shares rose 7.2 percent to $68.75 in late-morning trade.

Yum also operates the Pizza Hut and Taco bell chains and has more than 39,000 restaurants in more than 130 countries.

(Reporting by Ronald Grover; Editing by Jeffrey Benkoe)