The weaker sales trend continues for
Yum! Brands Inc.
), as the company again witnessed a downward movement in its
China Division's comparable-store sales (comps) for the month of
YUM! suffered a 29% decline in its April comps in China as a
result of a 36% fall in comps at its KFC brand, partially offset
by a 5% increase in comps at Pizza Hut Casual Dining. However,
the decline did not come as a surprise. Management had earlier
anticipated the April comps for the China Division to be
Although Yum! has declared that it has and always will take
the necessary precautions to ensure the safety of its products,
adverse publicity arising from the recent outbreak of the H7N9
Avian flu affected KFC's performance in the region.
After contributing immensely to Yum!'s growth story in the
past few years, the China division began to falter since
fourth-quarter 2012 , mainly due to the allegations regarding the
quality of chicken supplied to KFC. During the first quarter of
2013, YUM!'s comps plunged 20% in China with a 24% decline in KFC
and a 2% decline at Pizza Hut Casual Dining.
At the current levels, YUM! is not quite sure about the time
needed to recover sales at KFC China. However, the management
expects the China division to record positive comps in the fourth
quarter of 2013.
China holds the key to the company's overseas expansion plans
and has played a pivotal role in Yum!'s solid performance over
the last few years. Hence, the current turmoil in KFC China may
be detrimental to the company's overall business in the near
Although the company is trying to overcome this adversity
through an aggressive quality assurance, marketing campaign and
various promotional offers, it will take some time to completely
recover. Further, all these initiatives will likely result in
incremental expenses that will weigh on the bottom line.
) comps also decreased 2.9% in the Asia-Pacific, Middle East and
Africa (APMEA), hurt by the outbreak of avian flu in China and
continued sluggish performance in Japan.
YUM! currently retains a Zacks Rank #3 (Hold). Other players
in the same industry, which look attractive at current levels,
Bloomin' Brands, Inc.
CEC Entertainment Inc.
) both carrying a Zacks Rank #1 (Strong Buy).
BLOOMIN BRANDS (BLMN): Free Stock Analysis
CEC ENTERTANMNT (CEC): Free Stock Analysis
MCDONALDS CORP (MCD): Free Stock Analysis
YUM! BRANDS INC (YUM): Free Stock Analysis
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