KFC, Taco Bell owner cuts forecast on China investigation

Yum Brands increasingly under pressure after a second food scare drove customers away

Yum Brands said same-store sales in China fell 14 per cent in the third quarter due to a food safety scare involving a former supplier

Yum Brands said same-store sales in China fell 14 per cent in the third quarter due to a food safety scare involving a former supplier

 

Yum! Brands, owner of the KFC and Taco Bell fast-food chains, cut its forecast for profit this year as its China division faces a backlash from another food- supplier investigation.

Earnings per share, excluding special items, will rise 6 per cent to 10 per cent this year, the Louisville, Kentucky-based company said. That’s down from a previous projection for growth of at least 20 per cent.

Yum, which has more than 6,400 restaurants in China, has been under pressure after a second food scare drove customers away from its KFC and Pizza Hut chains there.

The fast-food company is also struggling in the US, where Pizza Hut is trying to compete with peers offering steep discounts and new items.

Third-quarter net income more than doubled to $404 million, or 89 cents a share, from $152 million, or 33 cents, a year earlier, the company said. Excluding some items, profit was 87 cents a share. Analysts projected 83 cents, the average of 16 estimates compiled by Bloomberg.

Revenue fell 3.2 percent to $3.35 billion, missing analysts’ $3.37 billion average projection.

Same-store sales fell 14 per cent in China in the quarter.

The company in September reported a preliminary decline of about 13 per cent.

Shares fell 0.2 per cent to $69.60 in late trading in New York.

Yum slumped 7.8 percent this year through today’s close, while the Standard and Poor’s 500 Restaurants Index retreated 3.1 per cent.

Bloomberg