KFC parent Yum sees setback in China recovery

KFC parent Yum says China sales declined 13 percent in July, up from 10 percent in June

KFC parent Yum sees setback in China recovery

NEW YORK (AP) -- KFC parent Yum Brands Inc. said Monday a key sales figure for its China unit fell 13 percent in July, marking a setback in its push to recover from a bird flu scare and an earlier controversy over its chicken supply.

The company, based in Louisville, Kentucky, had reported a 10 percent drop in June. That had suggested it was on the path to winning over customers again, given the 19 percent drop in May and the 29 percent decline in April.

But in a filing with the Securities and Exchange Monday, Yum simply cited the "residual effects" of the supplier issue late last year for the steeper drop. It stood by its forecast that sales at established restaurants would recover over the course of the year and to turn positive in the fourth quarter. Sales at established restaurants is a key indicator of a chain's strength, because the measure strips out the impact of newly opened and closed locations.

China is a critical region for Yum, which is the biggest Western fast-food operator in the country, with KFC accounting for most its locations. The company has seen its profits soar along with the country's rapid economic expansion in recent years. In 2012, it raked in more than half its total sales from China.

But late last year, sales began to plummet after a Chinese TV report said some of the company's suppliers were giving chicken unapproved levels of antibiotics. The company later embarked on a campaign to reassure customers of the safety of its food, and said it was eliminating more than 1,000 small producers from its chicken supplier network.

At the end of March, its progress was interrupted when a new strain of bird flu surfaced in the country. Last month, the company said in reporting its quarterly results that the effects of news of the avian flu and any residual effects of the supplier issue had dissipated.

Yum, which also owns Pizza Hut and Taco Bell, has been reporting its monthly sales figures for the region to keep investors updated on its recovery efforts.

Its shares fell $2.95, or 4 percent, to $71.52 in afterhours trading. The stock closed the regular trading session at $74.47, up about 12 percent since the start of the year.

Updated : 2021-04-15 13:43 GMT+08:00