Yum China Sales Up in February Amid Turnaround

CHINA - KFC parent Yum Brands Inc reported an unexpected two per cent rise in February sales at established restaurants in China, after the Chinese New Year boosted sales in its top market that has been hit hard by a food safety scare.
calendar icon 12 March 2013
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Shares in Yum jumped six per cent in extended trading to $71.86, their highest level since November, after the results were far better than the estimated 8.7 per cent drop expected by three analysts polled by Consensus Metrix.

Yum also reported a 20 per cent decline in first-quarter same-restaurant sales for China, which was less steep than its prior forecast for a 25 per cent drop.

The February results included flat same-restaurant sales at KFC and 13 per cent growth at Pizza Hut Casual Dining.

Chinese New Year increased Yum China's February results in the mid-teen per centages, offsetting a similar hit in January, Yum said in a statement. As a result, the overall impact of the holiday was neutral for the first quarter, which includes only January and February.

The fast-food operator reaps more than half of its overall sales in China, where most of its nearly 5,300 restaurants are KFCs. It does not normally report monthly China sales results, but is doing so while it works to turn that business around.

Yum China's January same-restaurant sales fell 37 per cent, including a 41 per cent fall at KFC and a 15 per cent decline at Pizza Hut Casual Dining.

Yum last month said it expected KFC same-store sales in China to turn up by the fourth quarter.

The February results "would seem to imply that the recovery is potentially going to be faster than what we thought," Bernstein Research analyst Sara Senatore said.

Diners in China started cutting back on visits to Yum's restaurants in December after news reports and government investigations focused on chemical residue found in a small portion of its chicken supply.

Yum was not fined by food safety authorities.

The company has apologized for the chicken incident, vowed to end ties with smaller poultry suppliers that have not modernized their operations and pledged to further tighten its food safety procedures.

"I do think they've said all the right things so far. It's just going to take some time for consumers to get over the negative perception," Morningstar analyst R.J. Hottovy said.

A new Reuters analysts of KFC comments on Weibo - China's version of a social media site - showed that customer anger appears to be easing.

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