KFC and Pizza Hut parent Yum Brands Inc said October sales at established restaurants in China fell 5 percent, as it fights to recover from a chicken safety scare and bird flu outbreak in its top market.
Yum’s sales at restaurants in China have taken a beating since chemical residues were found in chicken from some of its poultry suppliers in China late last year. That was followed by a bird flu outbreak in China this spring.
The October sales result included an estimated decline of 7 percent at KFC and a 10 percent rise at Pizza Hut Casual Dining. The results for KFC were worse than analysts expected, but Pizza Hut outperformed, Jefferies & Co analyst Andy Barish said.
Yum executives had expected China restaurant sales to rebound in the current fourth quarter that includes the months of September through December, but they extended that recovery time after China’s restaurant sales tumbled 11 percent in September.
Chief Executive David Novak said on October 9 that Yum still must fully convince diners in China that food at its KFC restaurants is safe and predicted 2014 would be a “strong bounce back year.”
KFC China’s “aggressive”, low-cost value offer for chicken on the bone may have backfired after negative media coverage about the promotion’s portion size likely stunted its sales effort, Barish said in a client note. (Reuters)