Louisville, Ky.-based restaurateur
Yum! Brands Inc.
) powerhouse China Division's comparable sales (comps) declined
again for the month of August. Comps at YUM! dipped 10% due to a
12% fall in the same at its KFC brand. However, the rate of
decline moderated from the 13% shortfall reported in July.
Yum!'s Pizza Hut Casual Dining registered 5% growth in China
in August, better than the July comps growth of 3%.
Moreover, the company estimated that the third-quarter 2013
China comps dipped 11% owing to a 14% fall in KFC, partially
offset by a 4% growth at Pizza Hut. The third quarter, results of
which are expected to be released on Oct 8, includes the months
of June, July and August.
In Dec 2012, the company's China division - the largest
contributor to YUM!'s revenue stream - encountered an allegation
regarding the quality of chicken supplied to its KFC restaurants.
The negative publicity resulting from this accusation continues
to hurt the company's sales results in China. In addition, the
outbreak of avian flu in China in early April also dented China
China, which holds the key to YUM!'s overseas expansion plans
and has played a pivotal role in Yum!'s solid performance over
the last few years, began to post negative comps results since
fourth-quarter 2012 due to the above setbacks.
Though the Zacks Rank #3 (Hold) company is witnessing weak
sales results for the past few quarters, it is trying hard to
recover its business and is expecting to record positive
same-store sales in the fourth quarter of 2013.
Although the company's China Division is reeling under
pressure, we believe the scenario is gradually improving.
Moreover, Yum! has a proven business model, which has survived
similar setbacks in the past. However, it will take some time to
reach the pre-issues level.
Some other restaurateurs which look attractive at the current
Burger King Worldwide, Inc.
CEC Entertainment Inc.
AFC Enterprises Inc.
). All these stocks carry a Zacks Rank #2 (Buy).
AFC ENTERPRISES (AFCE): Free Stock Analysis
BURGER KING WWD (BKW): Free Stock Analysis
CEC ENTERTANMNT (CEC): Free Stock Analysis
YUM! BRANDS INC (YUM): Free Stock Analysis
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