It seems that the tough phase for
Yum! Brands Inc.
) is not over yet. The company's powerhouse China Division has
again witnessed a dip in its comparable sales (comps) for the
month of July.
In a recent SEC filing, Yum! Brands stated that its China
Division's comps have suffered a 13% decline in the month under
review. The drop was the result of a 16% drop in same-store sales
for KFC brand, partially offset by a 3% rise in comps at Pizza
Hut Casual Dining. Adverse publicity arising from the allegations
regarding KFC China's poultry supply situation in Dec 2012,
continues to impede China Division's comps. To add to the woes,
the outbreak of avian flu in China in early-Apr 2013 also dented
China Division's performance. However, the decline did not come
as a surprise as management had earlier anticipated comps to be
China Division-accounting for more than double of its U.S.
revenues-has played a key role in Yum! Brands' solid performance
over the last few years. However, it began to falter since
fourth-quarter 2012 due to the aforementioned setbacks. In its
recently reported second-quarter 2013, Yum! Brands' total revenue
declined 8% year over year as a result of a 20% plunge in China
Although the company's China Division is reeling under
pressure, management expects these hurdles to be short-term and
external. The Zacks Rank #2 (Buy) company anticipates that it
will gradually recover from the downturn and might post
impressive results in the latter half of the year.
However, we believe even though the company is trying to
overcome this adversity through an quality assurance and various
promotional offers, it will take some time to reach the
) posted positive comps for July. Global comps nudged up 0.7% in
Jul 2013, backed mainly by improved performance in the U.S.
System-wide sales were up 1.6% in the month under review.
Some other restaurant industry stocks with a favorable Zacks
Jack in the Box Inc.
Buffalo Wild Wings Inc.
). Jack in the Box carries a Zacks Rank #1 (Strong Buy) while
Buffalo Wild Wings holds a Zacks Rank #2 (Buy).
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JACK IN THE BOX (JACK): Free Stock Analysis
MCDONALDS CORP (MCD): Free Stock Analysis
YUM! BRANDS INC (YUM): Free Stock Analysis
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