Yum cuts profit outlook on China troubles
NEW YORK (AP) — Yum Brands cut its profit outlook for the year on Tuesday, citing a food scare in China that pummeled sales at its flagship KFC chain.
The company, based in Louisville, Kentucky, said it now expects earnings per share to rise between 6 and 10 percent from a year ago, instead of the growth of at least 20 percent it previously forecast.
Yum, which also owns Pizza Hut and Taco Bell, is trying to recover from a TV report earlier this year that showed one of its suppliers using expired meat. The company has noted it was hurt by the controversy even though it got a limited number of products from the supplier in question, a unit of OSI Group.
During the quarter, Yum said sales fell 14 percent at established locations in China, including a 14 percent drop at KFC and an 11 percent drop at Pizza Hut. China is a key division for Yum, which gets 35 percent of its operating profit from the country.
McDonald's, which has a much deeper relationship with OSI spanning the globe, was far more affected by the controversy, with many restaurants unable to serve basic menu items like burgers and chicken.
Back in the U.S., Yum reported mixed results for its three chains. For its best performer in the U.S., Taco Bell, sales rose 3 percent at established locations, boosted by the national launch of a breakfast menu.
Sales rose 2 percent at KFC and fell 2 percent at Pizza Hut.
For the quarter, Yum said it earned $404 million, or 89 cents per share. Not including one-time items, it earned 87 cents per share. That's a penny more than analysts expected, according to Zacks Investment Research.
Total revenue was $3.35 billion, falling short of the $3.46 billion Wall Street expected.
Its stock rose 50 cents to $70.23 in after-hours trading, after closing down about 2 percent.
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