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Yum Brands Q2 Profit Falls Due to Weakness in China, But Earnings Beat Estimate (YUM)

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Fast food chain operator, Yum! Brands Inc. (NYSE: YUM) said that fiscal second quarter income fell 15%—a third successive quarterly decline, as customers in China continued to remain reluctant to eat chicken at its KFC outlets due to bird flu fear.

Still, adjusted earnings beat analysts’ expectation.

Shares of Yum Brands edged up in afterhours trading.

KFC sales in China have come under immense pressure since last December, when an investigative agency found that its chicken suppliers violated safety standards. Later, the outbreak of bird flu further damaged its business in China.

For Yum Brands, KFC China has been the key factor behind its double digit profit growth for 11 straight years until Dec. 2012.

In the recently concluded quarter, same-store-sales in China fell 20%. However, in the U.S. and other international markets (excluding China and India), it rose 1%, each.

In June, however, the declining trend in same-store-sales eased in China as it fell only 10% after falling 19% and 29% in May and April respectively.

Commenting over improving sales in China, Yum Brands’ Chairman and CEO David Novak said, “The good news is that China sales are recovering as expected.”

“The extensive media surrounding avian flu in China has subsided, and same-store sales at KFC are clearly improving,” added Novak.

For the fiscal second quarter, Yum Brands reported net income of $281 million or 61 cents a share compared to a profit of $331 million or 69 cents a share, in the year –earlier quarter.

Stripping out onetime items, adjusted earnings stood at 56 cents a share.

Revenue fell 8% to $2.9 billion.

Analysts’ consensus estimate was for earnings of 54 cents a share on sales of $2.93 billion.








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edliston
Post Written By: Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.

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Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing.

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