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Yum’s expects 13pc fall in same-store sales in China after supplier probe

PUBLISHED : Thursday, 04 September, 2014, 10:34am
UPDATED : Thursday, 04 September, 2014, 10:34am

Yum Brands estimated same-store sales in China fell about 13 per cent in the third quarter and continue to decline, hurt by a food safety scare in late July when a former supplier was said to have used expired meat.

The company’s shares fell nearly 4 per cent in trading after the bell on Wednesday.

“Since July 21, Yum Brands’ China division has experienced a significant, negative impact to sales at both KFC and Pizza Hut following adverse publicity regarding improper food-handling practices by former supplier Shanghai Husi,” Yum said in a regulatory filing. “While sales are beginning to rebound, they continue to be negative.”

Yum, which gets more than half of its sales from China, said it would provide an updated full-year earnings forecast when it reported results for the third quarter to August.

A few days after the food scare, Yum had warned that a sustained impact on sales would “have a material effect on full-year earnings per share”.

Yum’s sales at established restaurants in China increased 15 per cent in the second quarter and the country accounted for about 61 per cent of its sales in the period.

While sales are beginning to rebound, they continue to be negative
Yum Brands

The food safety scare in China was triggered by a television report on July 20 that showed staff at the Shanghai Husi Food facility using meat that had expired and had been lying on the floor.

Yum, which has nearly 6,400 restaurants in China, has since cut its global ties with United States meat supplier OSI Group, the parent of Shanghai Husi.

Yum planned to “vigorously” pursue legal action against OSI and Husi to recover damages from the incident, the company said on Wednesday.

Yum, McDonald’s and coffee chain Starbucks are among the global brands that had pulled products from their outlets in the country.



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